Tuesday, September 30, 2008

Filtering Through the Noise: Markets Rally After Worst Day

The US stock markets are volatile enough to drive a sober man to drink. Of course, adroit options players are having a field day on the wild swings with naked straddles and bets one way or the other.

But the noise has to be filtered out and I found an exceptional article on cnn.com by economist Jeffrey Miron which expresses a belief that bankruptcy, not bailout, is the correct solution, something that's been opined ad nauseum on this blog.

The American public made it unquestionably clear that they opposed a massive taxpayer-funded bailout of failed financial institutions. Congress, as of yesterday, apparently got the message, sending the measure down to defeat, but somehow, hundreds of thousands of phone calls and emails from everyday citizens can't keep the morons on Capitol Hill from trying again.

So, today, one day after the largest single-day point decline in the history of the Dow Jones Industrials, investors were busily picking up the broken pieces - by the handfuls. All indices were up sharply from the outset and finished by recovering more than half of Monday's declines. The conventional wisdom says that congress is still going to produce some kind of bailout bill, so investing is still a safe game.

My opinion, and that of others who see this entire "sky is falling" scenario as little more than political posturing and craftiness, is that the real players in the market found incredible gems at unbelievably low prices on Tuesday.

Dow 10,850.66 +485.21; NASDAQ 2,082.33 +98.60; S&P 500 1,164.74 +58.35; NYSE Composite 7,532.92 +328.91

Essentially, the markets are going to gyrate until the congress goes on recess, with or without a bill. What's clear is that, to many lawmakers, winning re-election is likely more important than "saving" the economy. This is more about politics than money, but the politicians and Wall Street schemers - Treasury Secretary Paulson chief amongst them - are playing with $700 billion, the US economy and the free market.

I'll not pretend to have a crystal ball, but reiterate that Wall Street needs to take its medicine and congress needs to go on vacation, as previously planned, without passing anything. Take the posturing and fake sincerity back to your states and districts. See how it plays in Peoria.

One possible bit of arsenic in the broth could be this: hedge funds are expecting a flood of redemptions or cash-outs after they report results for September. So far, it doesn't seem to be any more troubling than what we've already witnessed so far this year and is probably more a canard than a canary in the mine shaft.

On the day, advancing issues far exceeded decliners, 4653-1795. New lows outweighed new highs, 602-22, a margin befitting the absurdity of the current condition. Market volume was moderate.

NYSE Volume 1,599,455,000
NASDAQ Volume 2,387,042,000

Oil finished the day with a gain of $4.27, at $100.64. Gold closed down on the day, at $880.80, losing $13.60. Silver also offered no safe haven, dropping 75 cents to $12.28.

Is it just me, or is the feeling that the storm has pretty much passed becoming more and more prevalent? Checking Fibonacci numbers and a variety of charts and indicators, we should be nearing a bottom in stocks. The major indices are already off 25% or more from a year ago, so how much further can they go? The largest failures have likely already occurred. The "economic tsunami" being predicted by politicians and the media may be more smoke and mirrors and scare mongering than reality.

Monday, September 29, 2008

As Wall Street Tumbles, Main Street Cheers

With the ill-advise and hastily-prepared Emergency Economic Stabilization Act of 2008 failing in the House of Representatives, conservatives and liberal alike are cheering the 228 members who voted against the measure.

The actual votes cast by each member of the House can be seen here.

Failing largely along party lines, the measure now seems doomed to permanent defeat even though stocks - particularly those in the financial sector - have suffered one of their worst days of all time.

Repeatedly told that the entire US and global financial system was at risk, especially by President Bush, Treasury Secretary Paulson and congressional leaders of the Democratic party, the stock market seems to have fulfilled the prophecy.

Dow 10,365.45 -777.68 (6.98%); NASDAQ 1,983.73 -199.61 (9.14%); S&P 500 1,107.06 -105.95 (8.73%) NYSE Composite 7,207.02 Down 683.35 (8.66%)

What has never been fully explained is just how the economy would be brought to its knees. With catch-phrases of "frozen credit markets" and "failing institutions" being tossed about for at least the prior two weeks, the actual fallout at the close of trading today is spectacular, but in no way catastrophic.

In fact, compared to the closing lows of Wednesday, September 17, the Dow is only 244 points lower. On that day, a day before Paulson announced consideration of the "bailout" plan, the Dow closed at 10,609.66. The NASDAQ, which suffered the worst percentage loss today, finished at 2098.85 and the S&P closed at 1156.39 on the 17th.

So, in retrospect, the declines of Monday, September 29, when viewed in a larger perspective, were not all that incredible. Wall Street thought they were going to get a free lunch courtesy of the US taxpayer and had bid themselves back upwards. Once the free money was swept away by the House of Representatives, they expressed their anger by selling, even though today's sell-off was far from a panic. In fact, the Dow's decline over the last 8 days of trading is less than 3%.

Let the bargain hunting begin.

The day was largely a rout, however, with declining issues outnumbering advancers, 5897-619 and new lows trouncing new highs, 1740-39.

Volume was heavy, but especially so in the final 1 1/2 hours of trading, after the House defeated the bailout measure.

NYSE Volume 1,969,514,000
NASDAQ Volume 2,843,311,000

Oil took a significant hit, down $10.52, to $96.37. Gold gained just $5.90, to $894.40, while silver actually lost 48 cents, closing at $13.03.

This aberrant behavior in the commodities markets confirms that the financial underpinnings are not endangered, though the potential for a serious deflationary spiral continue to form in the background.

As I've been saying here for at least the past three months and probably longer, deflation is the real issue. For some, especially businesses trying to keep prices stable, this is troubling. For consumers and small business, however, a spate of deflation is welcome, as small merchants and companies are better prepared to adjust pricing "on the fly" so to speak.

What is occurring could be considered the beginning of an American - and to a larger extent, global - Renaissance, in which the excesses of Wall Street are replaced by innovation and the micro-economics of local and middle-class commerce, which is less orderly, though eminently more egalitarian.

Wall Street may be suffering through one of the worst periods in its long and highly-checkered history of booms and busts. In the long run, though, Main Street and the US consumer may become the ultimate victor.

House Votes Down Bailout, Saves America

The House of Representatives, for once heeding the overwhelming voice of the public, voted down the massive $700 billion bailout of Wall Street banking interests.

By a vote of 228-205, the Emergency Economic Stabilization Act of 2008 bill was defeated across party lines, with rank-and-file Democrats and Republicans defeating the measure.

As expected, Wall Street reacted with shock and horror. The Dow Jones Industrials, already down 300 points, briefly dropped as much as 700 points before recovering somewhat. At this writing, the Dow is down 450 points. The NASDAQ is down roughly 125 points as Wall Street heads towards the close of the session.

It was obvious this morning that the authors of the bill - the administration and Treasury Secretary Henry Paulson, along with Democratic party leaders - did not have enough votes to pass the measure. The vote on the bill was delayed into the early afternoon, but once brought to a vote, the measure was soundly defeated.

It is unclear whether reconsideration will occur.

For the time being, the measure is dead. Now all the American people have to do is convince congress to recess, leave Washington and go back to their districts until the election is over. All members of the House of Representatives face reelection this year.

Bailout Plan Is Complete Garbage

The proposed federal bailout plan which is scheduled for a vote in the House of Representatives today, Monday, September 29, 2008, is nothing more than a $700 billion expense to taxpayers, with limited congressional oversight and no hard provisions to limit executive enrichment or protect either homeowners or taxpayers.

In the bill, known as the Emergency Economic Stabilization Act of 2008, and available at publicmarkup.org here. enables the Secretary of the Treasury (currently, but hopefully for not much longer, Henry Paulson) to purchase a broad swatch of assets from virtually any type of American business.

The limits on spending (to buy bad debts and other assets) are initially $250 billion, but the mechanism for the Treasury Secretary to increase the spending amount up to and beyond $700 billion is quite easily facilitated.

The House of Representatives is scheduled to vote on the measure shortly after noon Eastern time, though passage is far from certain. Public opposition has been nearly universal. Rank-and-file Republicans and Democrats are seen to be the major opposition to the bill, which is being supported by the President and the Democratic party leadership. Both House and Senate Republicans are largely divided on the issue.

Wall Street is providing few clues as to whether passage of the bill is necessary or wanted. The Dow is down 277.26, with the NASDAQ off 84.61 with a little more than an hour before the critical House vote.

If the measure succeeds, there is no guarantee that all of this spending will change anything in either the short or long term.

It is the position of this writer that the American public would be best served by the congress voting down this horrible piece of legislation, recessing and doing nothing. If the stock market is going to crash and the credit markets completely freeze up, then Wall Street and investors will receive exactly what they deserve. The plan proposed by the administration and changed only cosmetically by congress won't change much, if anything.

Additional information will be posted as events warrant.

Friday, September 26, 2008

Dow Ends Higher; What Happened to the Crisis?

Well, the markets gave us all the answer we were seeking. There really wasn't a "severe financial crisis" such as was being peddled by Henry Paulson and the Bush administration. It was all scare tactics designed to steal $700 billion dollars from US taxpayers and give the Treasury Secretary unimpeachable powers.

They failed. Miserably.

The Dow finished up 118 points on Friday and is up a very healthy 550 points since the low last Wednesday of 10,609. Wasn't it supposed to crash? My point exactly. This whole sordid affair is a massive fraud perpetrated by the White House and Treasury. There's no chance of passage by congress of anything even remotely resembling Paulson's original 3-page draft proposal.

Wall Street, at this point, doesn't really care. They seem to have matters under control. The media, however, are very confused. While many outlets are saying that McCain blew up the meeting at the White House, some right-wing radio hosts, especially Rush Limbaugh, are blaming Obama for killing the deal.

The NY Times provides some background to suggest that neither had much to do with killing the proposal.

Whatever the case, the White House was generally thwarted by rank-and-file Republicans in the House and Democrats in both houses. By doing nothing, so far, congress has saved us $700 billion. Paulson's plan was panned by Senator Richard Shelby and 200 economists as unworkable.

If the US economy was in serious circumstances, we could surely count on the current cast running the federal government to make a mess of it by playing politics, as they do, all the time, non-stop.

The blame for this one, though, falls surely on the Republicans, specifically the White House, for proposing the bailout to being with.

There may be a deal tonight, tomorrow, Sunday, Monday or never. At some point all of the congresspeople will want to get out of town and back to their districts and states for a recess until the election. Many are in tight races which could help explain the Republican motives at the start. By keeping incumbents in D.C., the challengers of many first-term Democrats would have an edge.

That doesn't seem to have worked out, however. Congress will recess sometime next week, if not over the weekend. There's no crisis and no need to rush any legislation. Both the congress and president will be lame ducks in less than 40 days. It's time for them to go home.

Dow 11,143.13 +121.07; NASDAQ 2,183.34 -3.23; S&P 500 1,213.27 +4.09; NYSE Composite 7,890.46 -37.41

On the day, though, the indices were split, decliners were far ahead of advancing issues, 3977-2362. The Dow, in particular, was aided by AIG being replaced with Kraft (KFT). New lows soared beyond new highs, 484-20.

There's obviously still considerable weakness in the markets, but nothing of the scale the public has been told. Further declines are ahead, maybe on the order of 10-20%, and we're in a slight recession which is likely to get worse before it gets better.

The upshot of all this malaise and confusion is that Main Street is one heck of a lot healthier than Wall Street. Small business should thrive over the coming months and years. Stocks may be under pressure for some time to come.

Oil slipped $1.13, closing at $106.89. Gold gained $6.50, to $888.50. Silver ended at $13.50, up 23 cents.

Volume was moderate to light, very un-crash-like.

NYSE Volume 1,169,676,000
NASDAQ Volume 1,986,540,000

What? No Crash? And Why is This Man Laughing?

Overnight, while the politicians in Washington dreamt sweet dreams of re-election and $700 billion bailouts, the FDIC took over Washington Mutual, sold a portion of the assets to JP Morgan Chase (the rich really do get richer) for about $1.9 billion and maybe saved the economy.

Geez, regulators actually doing the right thing. What a concept.

In the nation's capitol, president Bush and his lackey, Treasury Secretary Henry (Hank) Paulson are watching in disbelief and horror that their "emergency" plan to save the economy from imminent financial "crisis" is going up in flames as members of their own party - House Republicans plus Senators Shelby and Bunning - are balking at the outlandish proposal.

And today... the stock market didn't crash. Well, at least not yet. The Dow is down about 60 points, but it's still a good 350 ahead of the closing low last Wednesday of 10,609, so, if there's going to be a sell-off because the bailout plan is not going to happen, it had better be a big one and it ought to happen soon.

Why? Because if the market doesn't crash today, it's not likely to any time soon. Meaning the beg scare the president and Paulson and Bernanke put on the American public was more or less a hoax. The world isn't ending, the financial underpinnings of the world economy are not crumbling (Weaker, sure. Crumbling, no.), and Wall Street doesn't need $700 billion of unfunded, must-be-borrowed taxpayer money to bail out about 3 or 4 already bankrupt big financial firms and another 12 to 20 smaller ones which are on the ropes, or, maybe it was just so they could hide all the lies and deceptions and outright theft that took place over the last 8 years.

That's probably already been handled. Goldman Sachs, in whose coffers most of the illegal money and wild derivatives rest, is now a bank holding company, a commercial bank, and the books will remain far from the peering eyes of bank regulators for the time being. Maybe the FBI will get a glimpse somewhere down the line, but probably not enough to indict anyone.

So, problem solved. Everybody have a nice weekend.

Wait a minute, you wonder. What about that screed of yesterday in which you basically outlined a doomsday scenario?

You ask. I answer.

At the time of that writing and all day Thursday, it looked very much like the congress was once again acceding to the wishes of the worst president in the history of the nation and was about to put American's further down the debt hole. I had wrapped up my writing for the day at about 5:00, before events at the White House changed the game.

The Wall Street Journal actually has a nice report on how things fell apart.

There is no deal. Not on Thursday and not today, anyhow. Lawmakers (I love how we give the slackers in congress such laudatory nicknames) say they will work over the weekend to hammer out a compromise, meaning that the Bush-Paulson plan is dead and US taxpayers won't be on the hook for a huge wad of money. There probably will be some kind of plan out of congress, but it will not be anywhere near the cost of $700. It's more likely that a phased-in plan could be worked out or that the whole thing gets put on hold until after the election and everyone in Washington goes back to their respective states and districts to resume campaigning, as was originally planned.

Additionally, the Jewish holiday of Rosh Hashanah is September 29 through October 1, beginning and ending at sundown on those dates, Monday and Wednesday of next week.

Not to sound racist or anti-semetic, because I know how comments such as this one can be misinterpreted, but the likelihood of a crash occurring on, during or just prior to Rosh Hashanah are slim because there are many Jewish people involved in the functioning of top trading and financial firms and they'll not be working those days. Many Jews are quite devout and take their holidays seriously. Volume on the stock markets is noticeably down on most important Jewish holidays, and Rosh Hashanah is New Year for Jews. Happy New Year! The market's not going to crash.

So, I'm fine.

Actually, I'm laughing at John McCain's grandstanding - "I'm going to Washington to save the economy, dammit. No debate. This is too important."

I will make an easy buck off of this. I bet my father a dollar that McCain would show up for the debate despite his earlier statements. Either way, he looks bad. First, canceling the debate (or at least trying to) was a bad idea. Besides, there are 535 congressmen and 99 other Senators working on the economy. I don't think they'd really miss Big Bad John much since he hasn't actually attended Congress in the past two years. Actually, ditto for Obama. They've both been busy campaigning.

I am also laughing at this whole bogus "crisis" which Bush and Paulson schemed up. Well, it's been a week now since Paulson put together his $700 billion bailout plan. It's not going anywhere and since last Wednesday, when the Dow hit 10,609, it's actually up about 350 points and only down 50 today. That could change, but with the failure of WaMu, the nation's largest bank failure ever, last night, the market kind of just yawned. If there was going to be a crash, it would have occurred this morning. Crashes don't happen in the middle of the day.

I've been saying for a week that congress should do NOTHING, which is something at which they have great expertise. Go on recess, go home and campaign, come back after the election. Maybe my message is getting through.

I'm also laughing at Nancy Pelosi. You have to understand the humor in hearing her say, "We're not passing anything until we know the rank and file REPUBLICANS are on board." Hilarious!

And, finally, I'm laughing at eBay. Not only is the company self-destructing, but I've now been prohibited from posting on their message boards for the 4th time in the last 4 months. I've had 2 7-day suspensions, a 30-day suspension and now another 30 days in the hole. Seems the message board moderators are a little peeved about what I have to say about politics mostly. There are a couple of ex-military right-wingers on the board and I have been somewhat outspoken (who me?) about what they and the radio talk show hosts say being untrue and generally supporting the liberal or progressive or, actually, the reasoned and intelligent viewpoint. Every now and then, I do call somebody a name or two, but in general, my suspensions have been largely politically-motivated. Remember, one of McCain's top advisors is Meg Whitman, former CEO of ebay. Old loyalties die hard, I guess.

Anyhow, there are 39 days until the election. Obama's lead continues to build. There are only 116 days until Bush and Cheney are officially out of office. Looks like we may avoid going to war with Iran and the president's final attempt to screw American taxpayers out of $700 billion MORE dollars is going down in flames.

A few closing salient points:

The WSJ points out that "Republican leadership aides said as few as 30 to 40 of the 199 House Republicans could end up supporting the Bush package."

And, on Monday, an agitated Henry Paulson, responding to questions about the enormous price tag of his proposal by members of congress on Tuesday, Paulson snarled, "Guess what? The taxpayers are already on the hook." Guess again, Hank. We stopped listening to you and your people a long time ago. Repudiation deluxe!

Paulson reportedly got down on one knee on Thursday and begged Democrats not to disrail the plan. Begging. How quaint! He'd be begging for a shorter prison term if I had my way.

Queue up "Happy Days are Here Again" or maybe "Dancin' In the Street," because right now, things are certainly looking up for us working folks.

God Bless America!

(I'll have a final post for the week after the markets close, around 6:00 pm ET.)

Thursday, September 25, 2008

Joy Ride Up (and Down) Wall Street (Part 1)

Editor's Note: There is so much to be said here, I could write for days and not even begin to scratch the surface, so today's normal single post is being broken into two parts, but since this is a blog in reverse chronological order, I'm publishing this part last.

First, an overview of the day's events.

Basically, if you're not up to speed on the destruction of the American financial, legal and constitutional system. The administration and the congress - collectively the worst bunch of people ever elected to public office - have conspired to take $700 billion dollars of taxpayer money, ostensively to bail out Wall Street and foreign firms which are likely already insolvent, and buy up their unsalable bad paper.

There will, as usual, be cursory oversight and some lame, toothless provisions to limit executive pay for plan participants.

Stocks soared on reports suggesting swift passage of the legislation, with bipartisan agreement. President Bush met with Twiddle-Dee and Twiddle-Dum, otherwise known as candidates John McCain and Barack Obama, both of whom pledge change, but, when it really matters, simply go along with the status quo.

The Dow rallied nearly 200 points, though it was up over 300 at different points of the day.

Dow 11,022.06 +196.89; NASDAQ 2,186.57 +30.89; S&P 500 1,209.18 +23.31; NYSE Composite 7,927.87 +159.05

Advancers trampled decliners, 4205-2145, but check out the new highs (23) to new lows (277), 12-1, not very promising. I'd say, even with this artificial stimulus stocks still aren't going anywhere soon, except lower.

Oil gained $2.29, to $108.02. No surprise there, or in metals movement. Gold sank $13.00, to $882.00. Silver fell 17 cents to $13.28.

Continue to part 2...

Joy Ride Up (and Down) Wall Street (Part 2)

The government, which is supposedly under the purview of the "people" has run amuck. They are not responsive to the wishes of the people. Congressional aides said that calls were coming in to their offices yesterday 99-1 AGAINST any kind of bailout, yet the government presses ahead.

And, sure, we've had these kinds of things before, but this is very different. They are going to sweep away all the wrongdoing with what's likely to become $2 trillion before they're done, with absolutely no accountability.

If the government passes this legislation - and I'm pretty sure that they will - you can kiss this country good bye in less than 20 years. All of the baby boomer generation will have retired by then, most of them to a life of poverty and degradation as prices soar and social security is cut back.

I have three nieces whom I love. Their futures are being wasted by this insidious government only interested in winning the next election. Once any politician gets to Washington, they become part of one bigger party: the ruling class.

Whoever wins the election will do no better. I thought Obama was the agent of change. WELL, HE CAN START BY NOT GOING ALONG WITH THE STATUS QUO. HE'S JUST ANOTHER ONE OF THEM, AND SO IS MCCAIN. We will get no change, no matter who wins. Just more of the same. And slowly, slowly, our freedoms are eroded and the nation falls further and further into debt and the politicians and Wall Street do as they please while we struggle to get by.

Adieu, America. You are not the country I once knew. You are a perversion, a shadow, a shallow reflection of what once was great.

I am thoroughly disgusted and beyond enraged. I am now the opposition.

A message posted to a message board called the bailout plan, "...a fascist takeover hiding behind a cultivated emergency."

That language is completely appropriate.

How this affects you and me: a rough outline

Every taxpayer (different from every American, as it excludes children, retirees, those on welfare or other public assistance, etc.) will incur about $5000 of debt, maybe $10,000 when it's all over, to be paid by current and yes, future taxpayers. Plus interest.

You won't get a bill for it, but you will notice that the government, in its infinite wisdom will work out other "market mechanisms" to ratchet up the pressure on the American taxpayer.

Highway tolls, fees for licenses, excise taxes, property taxes, sales taxes, will all increase all the way down the food chain. Services from government will shrink in size and scope. Basic necessities will cost more: gas, food, heating oil. The government will impose more tariffs on foreign goods to help pay the bill. They don't care that you'll pay more for anything imported, and just about everything is.

The dollar will continue to sink in value. Corporations, most of which do business outside the US will prosper. Home values will decline or stagnate. Wages will stagnate while the govt. takes more out of your paycheck.

So, while there's no actual bill to pay, the money is coming out of your pocket in the form of increased fees, inflation, and a lower standard of living which has as an ultimate end, nothing but devastation and failure, because the bill never gets paid, never gets forgiven.

The bailout doesn't even begin to solve the problem, it exacerbates it, kicking the can down the road. Trouble is, the road is a dead end.

Our government lies, cheats and steals from the public on a daily basis. And it's time for Americans to do the same to them. Stop paying whatever taxes you can. The loopholes are out there. I urge everyone to file a dba and form a home business, take all the deductions and lose money. Stiff them right back. What are they going to do? Put us all in jail.

Don't laugh. They might. The greed and hubris of this government knows no bounds. The stupidity of their idealism is that eventually, there will be no one left from which to steal.

The truth of the matter - which they won't tell us, ergo, the bailout - is that half of the major banks and financial institutions are already insolvent and so is the government. After this and Fannie and Freddie, we'll be over $11,000,000,000,000 in debt. And that, my friends, is $36,700 for every man, woman and child in America owed to foreign governments and lien holders. Pay up!

Wednesday, September 24, 2008

Just Another $700,000,000,000 Day at the Office

The debate on Capitol (or should it be "Capital") Hill rages over whether to grant Treasury Secretary Henry Paulson a $700 billion check to ball out failing - or already failed - financial institutions.

On Tuesday, the Secretary and Fed head Ben Bernanke gave testimony and fielded questions from the Senate. Today, it was members of the House of Representatives who took turns poking and prodding the "Desperate Duo." The hue and cry for accountability, protection and limitations on executive pay could not have been louder.

On the last point, Paulson and Bernanke finally gave in, bowing to congress' demands that CEO and top executive pay be slashed for firms participating in the plan. Whatever they lawmakers come up with, it will likely be watered down, non-binding and easily skirted. With $700 billion floating around, who's going to miss a couple hundred million for Paulson's buddies here and there?

The debate also raged on message boards. A message I posted on one such board seemed to sum up the situation to the satisfaction of a number of participants. It follows, in part, below:

Fannie and Freddie, the guarantors of about 50% of all mortgage loans in the US have already been taken over by the govt. The "banks" who made the loans repackaged the mortgages and sold them to investors.

The stupidity of the top financial firms was in their greed, they kept a lot of these mortgage packages - officially off their books - but still there, and in some cases borrowed against those same, bad funds to leverage themselves even more, until it all began to unravel.

Instead of dispersing the risk, they kept much of the risk concentrated in their off-balance sheet transactions, a la Enron. There are numerous parties and counter parties, all leveraged out through derivatives which will cause unknown damage across the credit spectrum.

At this point in time, the $700 billion has little to do with mortgages, and much more to do with credit risk, leverage and derivative exposure by top financial firms. There's no regulation of this money and risk and it continues to flare up as companies are exposed. Some of it is criminal, some just bad judgment. These companies caused the problem by not diversifying risk like they were supposed to according to their models and were leveraged 35-1 in some cases. Now it is unwinding and the carnage could be great though there will be survivors.

It needs to be unwound without bailouts and tax money or else it will just continue and will result in a real catastrophe down the road. You can't just play games and never get caught. There are consequences and the bailout is designed to take the burden off the financial companies which will be harmed or are already insolvent.

That pretty much summarizes my position. Meanwhile, a number of developments overnight and during the day are worth noting.

The FBI has launched a preliminary fraud investigation into the workings of Fannie Mae, Freddie Mac, Lehman Bros., and AIG, along with 22 other firms. The agency seeks information and background leading up to the various bailouts - all manufactured with close care by Paulson and Bernanke, I should add - and whether fraudulent practices were used in the lead-up to the eventual massive bailout proposal now under debate.

Goldman Sachs (Paulson's former firm) and Morgan Stanley were granted quick approval to change their designation from investment banks to holding - or, commercial - banks, in addition, they are seeking exemptions to retain their commodities and other businesses that normally don't fall under the rules. The speed at which these approvals were granted was breathtaking. No accounting, no review, no peering into the firms' practices. I suppose that when you're sweeping billions under the rug, you take care to do so quickly.

Dow 10,825.17 -29.00; NASDAQ 2,155.68 +2.35; S&P 500 1,185.87 -2.35; NYSE Composite 7,768.82 -16.45

President Bush will address the nation at 9:00 ET tonight on the airwaves. Hurrah!

In light of the confluence of events, the markets took a breather, trading in a narrow range. That still didn't prevent declining issues to outpace advancers, 3938-2363, or for new lows to overwhelm new highs, 294-19. Yes, 19.

Commodities were mixed, with oil falling 88 cents, to $105.73, gold up $3.80 to $895.00 and silver up 27 cents to $13.44.

John McCain could simply not resist the opportunity to grandstand, calling for cancellation of Friday's scheduled debate between him and Barack Obama, ostensibly to return to Washington to help get the legislation passed. He must be really worried about debating head-to-head with Obama.

What's sure to follow are calls that the Democrats are dragging their feet on this legislation. The administration surely wants to get its mitts on that bundle of cash and, as usual, they will hold a gun to the head of Democrats and the American public to get it.

What a day!

Volume was extremely light.

NYSE Volume 1,081,259,000
NASDAQ Volume 1,815,884,000

Tuesday, September 23, 2008

The Self-Fulfilling Financial Meltdown Prophecy

The Gospel according to Bernanke and Paulson:

Heed ye these dire warnings. Iffeth thou do not giveth the sum of seven hundred billion US drachmas to your brethren in the financial services industries, whatfor good are ye, oh, congress!

For iffeth thou shall fail to giveth away the money of the taxpayers to the richest men in the world, a terrible plague shall befall both of your houses: those of the House and yeah, that of the Senate as well.

No companies shall be spared the wrath of the vicious economic maelstrom which will surely come iffeth thou do not giveth over the money before the Sabbath, or Friday, or whenever you decide to go into recess, whichsoever of these comes first.

Heed ye these words well and giveth without oversight or conditions and without restraint on the prophets Bernanke and Paulson, for they shall lead us into the desert, and out, and probably back in and out and eventually down a black hole of debt.

These are the words of a pair of Wall Street snake oil salesmen.

That the financial crisis occurs on the week before quadruple-witching (last week) and in the heat of a taut presidential and congressional election is just a little too coincidental in its timing, isn't it?

Am I the only one who smells something fishy here, especially noting that every day the congress delays passage of the "emergency" bailout plan for failed Wall Street banks, stocks slide further still?

Monday was full of drama, and Tuesday was a nice sequel, with the markets tacking on further losses as Bernanke and Paulson testified before congress on the urgent need for $700 billion dollars.

Really! They want it before the week is over, and without deliberation and without the usual markup process and without oversight provisions, and $150 billion - as proposed by Senator Schumer - is not enough, and no cuts to executive pay for companies who participate in the largest single fraud ever perpetrated on the American taxpayer. Right away! The credit markets are frozen, don't you know?

Well, the ordinary American just isn't really buying it. Life keeps going on as normal in most parts of the country. People have ready cash or credit and sure, there's some suffering, but that's always been there. And those foreclosed homes, well, sell them at a discount. Hey, the people who bought them lost. The banks who lent the money, based on bogus appraisals and worthless credit checks, or no credit checks, can stand to lose a few billion.

Besides, weren't these loans all packaged up and re-sold to unwitting investors? Why do the banks and financial institutions have these toxic tranches of mortgage debt on their books. Are they just that stupid? And if they are, they deserve to go down the memory hole. No bailout. Not now, not ever, not on my - and your - dime. No siree!

Wall Street, meanwhile, played the part of the wounded puppy again on Tuesday while lawmakers on both sides of the aisle cast doubt on the program and some Republicans, notably Senators Shelby - who wants alternatives - and Bunning, have expressed outright opposition to the plan. Democratic Senator Christopher Dodd said the plan was "not acceptable."

So, get ready for the greedy self-dealers on Wall Street to send the markets into another dizzying decline. The word is out there. Either give us what we want, or we'll break the system.

Many would love to see them try to tank their own companies because for every unscrupulous, corrupt banker or financier, there's another lurking behind every trade and what once was yours becomes mine, and at a much lower price, thank you very much.

As if the stock market wasn't shaky enough on its own. It doesn't need any extra "help" finding a bottom.

Dow 10,854.17 -161.52; NASDAQ 2,153.34 -25.64; S&P 500 1,188.22 -18.87; NYSE Composite 7,785.27 -133.34

Our market guides were right on target again. Declines led advancers, 4419-1951. New lows surged again past new highs, 286-35.

Oil dipped $2.76, to $106.61 on the November contract. Gold was clipped $17.80, ending at $891.20. Silver also fell 28 cents, to $13.17. Commodities behaved normally.

If the market doesn't crash by Friday, it will serve as testament to the recklessness and deceit of both Bernanke and Paulson and their unashamed pleas to help the feckless bankers, "right now." They should both be locked up and the keys tossed away.

My advice to congress - despite them never listening to me ever before - is to do nothing, adjourn and recess on Friday and don't come back until after the election. Sure, the stock market may be down some by then, but I'll bet the US and global financial systems will still be functioning.

Volume was moderate, not like there was a crisis or panic. It's bad, but not that bad.

NYSE Volume 1,152,885,000
NASDAQ Volume 1,999,011,000

Monday, September 22, 2008

Market Chaos: Theater of the Absurd

If you thought last week's market action was wild, hold on. The second act: this week, figures to create such a climate of fear and derision the likes of which most traders and common people have never seen.

Remember 9/11.

That bears repeating: Remember 9/11, when the Twin Towers were felled, supposedly by fires caused by airplanes smashing into them 90 stories above ground. It was fiction then and it is fiction now.

And, you'll recall that the first thing the Bush administration did was to enact the Patriot Act, stripping out habeas corpus and other rights from the constitution and rushed through Congress without deliberation or debate.

The current "crisis" is nothing more than the handiwork of the same criminals. Henry Paulson, Treasury Secretary and former CEO of Goldman Sachs (more on those louts later in this article), put forward a piece of legislation to the congress calling for an "emergency" bailout of Wall Street companies and financiers to the tune of $700 billion - more or less - or else risk the "collapse of the US economy."

The language in Mr. Paulson's proposed legislation included this nugget: "Decisions by the Secretary [of the Treasury] pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

Of course it would. The administration is attempting to nationalize all the wealth in America. They've already glommed up most of the mortgage debt through the bailouts of Fannie Mae and Freddie Mac. They now own 80% of AIG, which was the nation's largest insurance firm. They are disguising a complete takeover of America's wealth by scaring everybody into believing that there is no alternative.

They are so utterly corrupt, deceitful, dishonest and ruthless that every American should be scared, not of financial ruin, but of tyranny and a de facto coup d' etat by the same group of "leaders" who marched us into Iraq on threats of "imminent danger", "weapons of mass destruction" and "the smoking gun is a mushroom cloud" rhetoric.

How absurd is it? Take a look at these closing numbers:

Dow 11,015.69 -372.75 (-3.27%); NASDAQ 2,178.98 -94.92 (-4.17%); S&P 500 1,207.09 -47.99 (-3.82%); NYSE Composite 7,918.67 -268.46 (3.28%)

And that's with short-selling of nearly 800 "select" companies being sheltered by the SEC's no-shorting rules which went into effect last week and will expire - however conveniently - on September 29, after congress has acceded to the demands of the Treasury Secretary and has gone into recess, of course.

The proposed Wall Street bailout has raised the ire of a slew of activist groups and the call is unified: No deal without accountability, enforcement and financial penalties to corporate executives. Better yet, some groups are calling for the best outcome of all: that congress take their scheduled recess beginning this Friday, and stay in recess until after the elections on November 4 without passing any legislation including this rushed, ill-intentioned (and probably unnecessary) bailout proposal.

The level of absurdity reached new levels on Monday as Goldman Sachs and Morgan Stanley - the two remaining investment banks out of five - asked to change their designation from investment bank to commercial bank. If approved, the crooks who robbed corporations of shareholder value for years can now take money directly from consumers as well.

Henry Blodgett makes the case in "Wall St. R.I.P."

More hilarity came from Yahoo's Tech Ticker with columnist
Aaron Task asking if last week was the market bottom.

Judging by the comments and today's results, Mr. Task ought to begin polishing up his resume right quick. His credibility as an economic correspondent is nil.

Market breadth was prominently bearish with decliners trouncing advancers, 5032-1365, or by a 4-1 margin. New lows retook their position above new highs, 182-60. Volume was extremely light due to the lack of short-selling and covering on many issues, general investor disgust and the declines of today represent a beginning of the final unwinding of this overly-leveraged market. Many small investors are clearly on the sidelines, and certainly, fund managers are shedding even more dead weight from their portfolios in light of the extreme market conditions, to say nothing of the impending end of the third quarter.

Commodities boomed once again, with crude oil for November delivery settling up $6.62, to $109.37. After spiking up $25, a clear threat from the PPT and those calling the shots of what's to come if congress doesn't grant Paulson and Treasury wide-ranging, sweeping powers to take over the wealth of the nation, the October contract closed at $120.92, up $16.37, the largest one-day gain ever for the slimy commodity. Gold was up $44.30, to $902.00. Silver, the day's best performer, was up nearly 8%, gaining 97 cents, to $13.45 per ounce.

NYSE Volume 1,269,865,000
NASDAQ Volume 1,914,590,000

Friday, September 19, 2008

Chicken Little and Henny Penny Save Wall Street


It's what drove the Dow down 950 points over two days this week. Oddly enough, fear also was the motivating factor behind Wall Street's dramatic two-day turnaround in which the Dow gained back nearly 800 points.

On Monday and Wednesday, the fear was that major investment banks were about to cause a global financial meltdown. On Thursday and Friday, the days the market rebounded, that same fear fueled a rally as government agents intervened with various devices designed to cool traders down, eliminate short selling and wipe clean the balance sheets of some of the most over-leveraged companies in America.

Was the fear of global financial calamity real? Maybe, though it was probably not as bad as many thought or as those government interlopers made it appear.

Rushing around Washington, jawboning members of congress, Fed chairman Ben Bernanke and Treasury Secretary Henry Paulson put on their best impressions of Chicken Little and Henny Penny, declaring to all who would listen, the sky is falling, the sky is falling!

Well, as we all know from the fable, the sky isn't really falling and sly Foxy Loxy eats most (or all, depending on the version you wish to read) of Chicken Little's friends.

So, the moral is the same on Wall Street as it is in stories we softly tell four-year-olds: Have courage, or don't believe everything you hear. This little nugget of wisdom should not be lost on investors, all of whom are in their adult years, though many act like four-year-old children.

If anyone was eaten, it was the American taxpayer, if the Paulson plan is actually adopted by congress. If it turns out that the pending disaster was more fiction than fact and congress either acts slowly or not at all, then we have all had our lunch eaten by the government and its various agents of deceit.

It's also worth noting that today was a quadruple witching day, on which contracts for stock index futures, stock index options, stock options and single stock futures (SSF) all expire. Huge sums of money changed hands this week.

For now, the Foxy Loxies have the upper hand and are laughing, but another adage also applies, he who laughs last, laughs best. And that last laugh, my dear friends and readers, comes November 4, election day. Who will be laughing then?

It should also not be forgotten that we are still in the throes of a vicious bear market. This week saw no bottom being put in place. It's far too early in the cycle for that. Also, true bottoms are never overcome by such massive volume as was evident on Thursday and Friday. There is still a long way down before recovery begins. The wild activity of this week should be seen only in the overall context of disaster averted... for now.

Dow 11,388.44 +368.75; NASDAQ 2,273.90 +74.80; S&P 500 1,255.07 +48.56; NYSE Composite 8,186.47 +411.31

The mammoth moves over the past two days did move some key metrics. On Friday, advancing issues outpaced losers, 5345-1131, nearly 5-1. For the first time in a very long while, new highs exceeded new lows, 442-280. It will be interesting and useful to see just how long those numbers remain shifted toward stocks making new highs.

Oil finished up $6.67, at $104.55, but the metals were battered, as one would expect. Gold fell $32.30, to $864.70. Silver lost 23 cents, fending the day at $12.48. The general understanding is that commodities should continue to unwind, along with stocks. The deflationary spiral has begun, and the government can only intervene just so much, for just so long. Sooner or later, the real market dynamics return.

This week was fun and proof once again that the party never stops on Wall Street.

Volume was very high, but again, there was an abundance of self-dealing.

NYSE Volume 2,954,863,000
NASDAQ Volume 3,965,442,000

Say Good Bye to Free Market Economics

Government Taking Extreme Measures to Rescue Corporate America


The measures being undertaken by various branches of the government, including the congress, the SEC and Treasury in concert with the Federal Reserve are the most extraordinary that I have ever seen.

The US Treasury is opening a function that will guarantee money market funds. Treasury also recently announced plans to sell bonds to fund the Federal Reserve. The Fed and Treasury are planning, with congress, to create an entity for the liquidation of bad debt. The SEC has banned short selling on 799 financial stocks.

Adding to the steps already taken - bailouts of Bear Stearns and AIG, the takeover of Fannie Mae and Freddie Mac - the federal government is engaging in nothing short of naked fascism, the combination of government and corporations.

Being sold as various attempts to "unfreeze the liquidity crisis" the government is doing more to boost the fortunes of the same people and companies which precipitated the whole mess. They are making them whole. Banks, funds and other financial institutions are being made whole by allowing them to whisk away all of their underfunded obligations from the balance sheets.

Eventual cost to the taxpayer for the entirety of these measures will run into the trillions of dollars. If the figure reaches $2 trillion (and that's probably conservative) that would result in a debt of roughly $6,500 for every man, woman and child in America.

Guess what? With 6,500 free dollars I could pay off almost all of my debt. So could most other Americans. My sister and her family would get $32.500. They could buy a few more rental units. Certainly, every other individual and family would benefit from such a generous show of largess. But, that's not going to happen. No, the money is going to the banks.

If the government wants economic prosperity, it would probably be better the forget the greedy, cruel, uncaring, lascivious banks and financiers and give the money directly to the citizenry. The banks will be saved, with the American people getting nothing but the bill.

It's absurd. The federal government is completely off the rails and out of control. Largely, it is the fault of the American public, who were warned at least 40 years ago about apathy toward government. Eventually, however, responsibility must fall on the sitting and previously-elected officials who allowed this pitiful economic condition to occur and who are now employing desperate - and ultimately damaging - methods to "fix" the problems.

The entirety collapse of the financial underpinnings, the bailouts and special entities created to restore confidence in the markets are not the making of the president, the Fed, the Treasury, the SEC, the congress, the Wall Street bankers or unscrupulous lenders. It is all of them, working in concert, to undermine the capitalist system and democratic institutions.

The government is already nearly $10 trillion in debt. Another couple-three trillion isn't going to affect anyone, except for the value of the US dollar, which will plummet in value even more than it has over the last 8 years.

On the surface, everything in most places in America will feel and look the same as always, except in one place: the future. Once more, America's leaders have chosen to mortgage our future to save the banks and other poorly-run and grossly-negligent financial institutions from even an ounce of pain, spending money we don't have that creates a debt to be bourn by today's youth and the yet unborn.

America is rapidly morphing into a complete warfare/welfare state. The current rescue operations are only the more bold and significant devices to further that particular political and financial structure.

The US stock markets, which are due to open within minutes, should end the day with record gains. The govenment has cancelled most, if not all, bad corporate debts. Horray!

Say good-bye to free market economics.

Thursday, September 18, 2008

US Stocks Gain on Treasury Plan Rumor and Innuendo

Briefly, how the Dow gained 400 points after losing 450 on Wednesday:

  • Before the markets open, the Federal Reserve, along with the European Central Bank, the Bank of England, the Bank of Japan and the Swiss National Bank inject $180 billion into into financial markets in an effort to add liquidity.

  • By 10:00 am, the plan seems to be working. The Dow Jones Industrials are up 200 points.

  • Investors, still shaken from Monday and Wednesday's fallout, begin to sell. By noon, the Dow is unchanged. By 1:00 pm, it is down nearly 150 points.

  • In a rocky afternoon session, the Dow regains its positive footing, but by 2:45 it is just above the unchanged mark.

  • CNBC reports that Treasury Secretary Paulson is in talks with congress about creating a pool for bad debt, similar to the Resolution Trust Corp. which helped clean up the savings & loan mess in the late 1980s and early 1990s.

  • By 3:00 pm, the Dow is back up 200 points and adds another 200 in the closing hour.

Naturally, the idea behind the Fed money-pumping and Paulson's late-day desperate jawboning are efforts in futility. Bad debt is bad debt, plain and simple. Wall St. wheelers and dealers made bonehead loans without proper regulatory supervision and now the federal government is supposed to bail them out.

Throwing money at the markets in overnight loans and swaps has proven - over the last 13 months of declining stock values - to be a purely stop-gap affair. Paulson's plan has little chance of finding sponsors in congress and even less opportunity to be acted upon anytime soon. Congress goes into recess at the end of the month, less than two weeks ahead.

But, that doesn't stop the CNBC equity pimps from applauding every single rumor or gesture by either Treasury Secretary Paulson or Fed head Bernanke. The two are have been anointed as infallible. And the gullibility of investors cannot be underestimated. Today's late surge was supposed to indicate that the crisis had passed... at least for now.

Elsewhere, Morgan Stanley (MS), one of only two remaining investment banks (the other is Goldman Sachs), is apparently in talks to be acquired by Wachovia Bank (WB). As odd as that combination sounds, Wachovia, itself under scrutiny be investors for a shaky balance sheet, rocketed up 59% on the day, from 9.12 to 14.50. Morgan Stanley gained over 3%.

Apparently, combining two failing companies into one will magically transform the remaining single entity into a financial powerhouse. Over the past 12 months, Wachovia has lost 75-80% of shareholder value. It traded as high as 53 per share last year. Morgan Stanley has dropped from nearly 70 to 22, a 68% decline.

Washington Mutual or WaMu, the nation's largest savings and loan bank, also got a boost, though hardly one of any significance, gaining 98 cents to close at 2.99. The stock is down more than 80% from a year ago. Goldman Sachs is attempting to find a buyer or additional funds for the troubled institution.

It's a real morass of bad money chasing more bad money. Wall Street's finances haven't been in such a state of chaos since the Great Depression and these mergers and fixes still fail to address the underlying cause - highly leveraged debt-to-equity and derivatives of staggering magnitude.

These repairs also don't offer any hope to the hosing market or the flagging economy. They are nothing more than chimeras, designed to keep the public unaware of the significance of the crisis. 98 out of 100 Americans actually don't have any idea of what is really occurring, but they do know that - in an overall sense of the game - today's gains canceled out yesterday's losses.

Dow 11,019.69 +410.03; NASDAQ 2,199.10 +100.25; S&P 500 1,206.51 +50.12; NYSE Composite 7,775.16 +334.77

The late-day rally lifted most boats but not all. Advancing issues had a huge edge over losers, 4811-1648. It was not enough to register one of the most unbalanced reading in new highs vs. new lows. 169 stocks made new highs, but 1438 reached new 52-week lows.

Gold was once again in the spotlight, rising $46.50, to close in New York at $897.00. Gold is up $118 in just two days. Silver gained $1.03 to $12.70. The move in the metals begs the question: If everything is all good now, why are investors flocking to safe havens like the metals and bonds?

Oil even managed a small gain of 58 cents, to close at $97.54, after briefly topping the $100 mark earlier in the day. Strangely enough, what was the topic of heated discussion just weeks ago - oil - has now faded to the back pages.

Volume was absolutely off the charts in one of the most volatile and high volume days of the year. Considering so much money was pumped into the markets by central bankers, that should not be a surprise. Nor should the dramatic climb of the indices. After all, most of the trading was nothing more than shady self-dealing.

NYSE Volume 2,430,078,000
NASDAQ Volume 3,914,326,000

Wednesday, September 17, 2008

Global Financial Carnage

When US stock markets opened on Wednesday, with fresh news that insurer AIG would receive an $85 billion loan from the Federal Reserve in exchange for an 80% equity stake in the company, there was hope that Wall Street could manage to display at least a modicum of confidence that a major economic calamity had been avoided.

What occurred was exactly the opposite.

Fear that more highly-leveraged companies would soon fall victim to the worsening global recession spread through the trading floors and brokerages around the world. All of the major US indices were off sharply at the open and continued to spend the rest of the session underwater. By noon, all had reached their lows of the day, with the Dow off a startling 390 points. By the end of the day the Dow was off 449 points and the other indices ending with even larger losses.

Not a single one of the 30 stocks on the Dow finished with gains. The biggest losers were AIG, JP Morgan Chase (JPM) and Citigroup (C).

Stocks remain in a worldwide tailspin. For the week, major indices are showing the following losses: Mexico's Bolsa (-7.4%), Brazil's Bovespa (-11.1%), London's FTSE 100 (-9.3%), Germany's DAX (-6.0%), France's CAC 40 (-7.7%), Russia's RTS (-21.1%), India's Sensex (-5.3%) China's CSI 300 (-7.2%), Hong Kong's Hang Seng (-8.9%).

Once again, financial stocks led the parade down into the bottomless pit of a financial system loose from its moorings. Investment houses Morgan Stanley and Goldman Sachs fell by 24 and 14% respectively, though both were considerably lower during the session. There's beginning to be a sense that the investment banking model is badly broken and that the remaining two should seek mergers with consumer banking interests.

A series of negative economic reports have been flowing into the markets as well, feeding into the swirling vortex.

Capacity Utilization for August fell to 78.7%, down from July's 79.7%. Industrial Production for August was down 1.1% after showing a meager 0.1 increase the prior month. Building Permits fell to 854K down sharply from the 925K in July. Housing Starts were also down, to 895K, form 954K in July.

Perhaps even more frightening to those who dread deflation more than inflation, the Consumer Price Index showed a -0.1% decline with Core CPI up 0.2%. Generally a good sign, continued price weakness should occur naturally as assets are wiped from the face of the earth, as is occurring. In that regard, the CPI is a lagging indicator, but signs of pricing pressure are appearing everywhere as money conditions tighten.

Dow 10,609.66 -449.36; NASDAQ 2,098.85 -109.05; S&P 500 1,156.39 -57.20; NYSE Composite 7,440.38 -352.75

Gold was a particularly bright spot, rising a phenomenal $70, to $850.50. as wealth preservationists imagined the worst-case scenario being carried out right before their eyes. Silver gained by an even-greater percentage, adding $1.16 to $11.68. Not to be outdone, crude oil rose $5.94 to $96.96.

The percentage gains for the metals were all-time, one-day records.

Market internals were horrific, to say the least. Declining issues subsumed gainers by a better-than 7-1 ratio, 5737-748. There were only 46 new highs, but an incredible 1530 new 52-week lows. More than 1 in 5 listed securities made new lows.

The Dow Jones Industrial Average is now down 25% from its October, 2007 all-time high (14,280.00); the NASDAQ, 27%. The S&P 500 has shed 26% while the NYSE Composite, the broadest index of stocks, with 3300 equities represented, is now down 28% from less than a year ago. All of these are multi-year lows, most coinciding with early 2005 levels.

Volume was substantial, noting that some major players have been and are still being sent to the sidelines. Trade volume is a relative consideration. With fewer and fewer participants, volume should decline. Today's volumes, though not historically high, may be at the high end of a new, lower regimen.

NYSE Volume 2,154,158,000
NASDAQ Volume 3,139,135,000

Tuesday, September 16, 2008

Fed Bails Out AIG; Leaves Rates Unchanged

After the markets closed, the Federal Reserve authorized an $85 billion emergency loan to insurance concern American International Group (AIG).

The nation's largest insurance company, AIG fell into the "too big to fail" category, which is a bunch of rubbish, but nevertheless qualifies it - in the minds of policy makers at the Federal Reserve - for assistance from US taxpayers.

Though the story on the government bailout was originally reported on Bloomberg around 2:30 pm, it was not confirmed and attribution was to unnamed sources. Still, the rumor was enough to keep markets from collapsing, which they had on the non-news of the Fed's rate announcement.

Following the FOMC's decision to leave the fed funds rate unchanged at 2.00% stocks sold off near their lows of the day. The Fed also left the discount rate at 2.25%. Moments later, the rumor that the Fed may consider authorizing a loan package for beleaguered insurance firm AIG began to circulate. Stocks began a sudden ascent.

Later, in the evening, well after markets had closed, the government announced a deal to save the battered insurance company.

AIG traded as low as 1.25 per share during the session, briefly showed a small gain, but finished in the red, down 1.01 at 3.75.

That the Federal Reserve has to bail out yet another company - this time a monstrous insurance concern - should not be cause for celebration, yet the market mavens managed to find a way to turn gloom into glory with a late-session rally, even if it turns out to be a very short-term upswing.

Following Monday's meltdown, Tuesday began with more panicky investors seeking relief by selling. All of the major indices were down heavily early on, but quickly regained their footing and toed the flatline through much of the session.

While today's action is hardly an endorsement for stocks or the general economy, it was at least not a disaster. That will likely come later, preferably, in the opinion of many, after John McCain is elected president. It should come as no surprise that Wall Street insiders prefer McCain over Obama. Despite his reformist rhetoric, McCain is a proven ally to Wall Street. Tough on workers, light on immigration law and lenient when it comes to standards and regulation, McCain will give the crooks and liars whatever they need to continue to savage the US economy and taxpayers.

Dow 11,059.02 +141.51; NASDAQ 2,207.90 +27.99; S&P 500 1,213.59 +20.89; NYSE Composite 7,793.13 +112.98

Interestingly, NYU professor Nouriel Roubini was making the rounds on all the talking heads after Monday's calamitous session. I seldom toot my own horn, but I have to say that Roubini is probably the only analyst I can find who holds a more pessimistic position than my own and who has been more prescient. Further, he's got the credentials to back up his words and he's been right almost as often as yours truly. I enjoy being in the company of people who share my keen perceptions.

On the day, the PPT and their proxies at the various brokerages, including Goldman Sachs and the recently-acquired Merrill Lynch, managed to control enough of the jawboning and trading to keep the indices above water.

Internal numbers were another story altogether.

Advancers and declining issues were in a virtual dead heat, with the winners ahead, 3269-3153. The real story was in the number of new highs (71), as compared to new lows (1629). The massive number of stocks hitting new 52-week lows represented nearly 1 in 3 listed securities on the NYSE reaching new bottoms on the day.

If financial armageddon isn't here already, it sure must feel like it to many investors, large and small. Incidentally, the indices in Japan and China were knocked down substantially on Tuesday as well. The Bank of Japan issued $18 billion in emergency funds to shore up stocks.

Taking their queue from the general market commotion, commodities took another hit. Oil lost $4.67, settling at $91.02, the lowest price in more than 7 months. Gold fell $6.50, to $780.50. Silver lost 62 cents, finishing the day in New York at $10.52.

NYSE Volume 2,163,764,000
NASDAQ Volume 3,247,308,000

Monday, September 15, 2008

Lehman Bankrupt; Merrill for Sale; AIG Seeks Fed Aid; Stocks Crushed

The world financial system met with extreme turmoil Monday morning as Lehman Bros., one of Wall Street's best-established investment banks, began the day by filing for bankruptcy protection in federal court.

The latest victim of the ongoing liquidity crisis, Lehman failed to find a buyer of last resort to rescue its failing franchise. Shares fell to 21 cents at the close of the session. Lehman had traded as high as 60 in January of 2008.

Fast of the heels of that dour note, news that Bank of America (BAC) was in talks to buy out Merrill Lynch (MER) for $50 billion (a mammoth premium) and troubled insurer AIG (AIG) was seeking $20-40 billion in loans from the Federal Reserve, hit the street rapid fire. (Later in the day, NY Governor Patterson approved a deal which would allow the company to borrow funds from its subsidiaries, allowing more time to negotiate with the Fed or negotiate the sale of additional assets.)

Markets opened to the negative and soon encountered steep losses. By 10:00 am, the Dow was off by more than 300 points. By the end of the day, the blue chips had turned in one of their worst-performing sessions in recent memory.

Dow 10,917.51 -504.48; NASDAQ 2,179.91 -81.36; S&P 500 1,192.69 -59.01; NYSE Composite 7,681.25 -410.59

Indices in Asia were spared the downdraft, as the news came off the wires as those markets were closing or already closed. In Europe, however, the carnage was widespread, as markets from Great Britain to Spain to Germany all suffered losses of between 2 and 5%.

In US markets, the internals confirmed that the selling was broad-based, though led by financial stocks. Overall, declining issues commanded a nearly 10:1 advantage over winners, 5803-615. New lows dominated new highs by an even greater ratio, approaching 20:1, at 1062-55.

Rather than call the washout session a bottom, analysts were more or less holding their breath along with their tongues, in anticipation of even worse news that seems to follow every few days.

The NASDAQ fared best of the major indices. While falling more than 80 points it still finished above the March 10 low of 2169.34. The Dow, however, fell below the July 15 closing low of 10,962.54. The S&P 500 was in near-panic mode, crashing through its July 15 low of 1214.91.

The last time the S&P closed this low was on October 27, 2005, when it ended the session at 1178.90. Today's close on the Dow was its lowest since February 13, 2006 (10,892.32).

What's concerning to many is the new policy stance of the Federal Reserve, which chose not to fix a buyer to Lehman, like it did in its rescue of Bear Stearns. While the Fed and Treasury are strong proponents of the Merrill-Bank of America marriage, they allowed Lehman to fail and also don't seem committed to helping AIG with loan guarantees or any other action. AIG's condition is different, however, in that it is not in a liquidity squeeze caused by malinvestments, but in a position to be downgraded by ratings agencies, making it more difficult for the firm to raise cash.

Still, the Fed's inaction on Lehman clearly displays a shift in policy, to a more hands-off stance, placing individual companies in a more precarious position while the Fed seeks to find more systemic remedies.

In the commodities area, oil and energy futures took a beating, led by crude oil, which saw futures for November delivery fall to $95.69, off $5.56. Gold rebounded $22.50, to $787.00. Silver gained 34 cents to $11.14.

Trading volume on the major indices was brisk.

NYSE Volume 1,876,814,000
NASDAQ Volume 2,727,545,000

Friday, September 12, 2008

A Day Better Taken Off

Stocks vacillated around the flat line on most major indices on Friday, as investors, apparently worn out from the volatile sessions earlier in the week, settled down, sat back and waited for Hurricane Ike.

Moving presidential politics to a back seat, the category 3 hurricane is headed to the heart of the Houston refinery complex, where most oil form the Gulf is turned into gasoline or other fuels.

Owing to the storm's presence, as the winds gained in intensity off Galveston, gas prices went up as oil prices went down.

In other economic news, retail sales fell in August, but the real news was the 0.9% decline in wholesale prices for the month, yet another indication of drying up demand and a global slowdown.

Also troubling was the Treasury Department's reluctance to bail out ailing Lehman Brothers (LEH, 3.78, -0.44). The formerly-high-flying investment bank is on its last legs and still searching for a rescue.

Dow 11,421.99 -11.72; NASDAQ 2,261.27 +3.05; S&P 500 1,251.69 +2.64; NYSE Composite 8,091.84 +80.59

In very thin trading, advancing issues edged decliners, 3302-2965. New lows continued to dominate new highs, 365-61.

Commodities reversed fortunes, for a day, at least, though the overall trend is still down. Oil ended higher by 32 cents, closing at $101.25 on the NY Mercantile Exchange. Gold gained $19, to $764.50. Silver rebounded 24 cents to $10.80.

It was a day better spent pondering the meaning of life or sipping mai tais by the pool. Life on Wall Street will get back to its normal dizzying pace on Monday. Well, maybe. The Fed meets on Tuesday, so it's likely nothing much may occur until then, when, in all likelihood, the FOMC will do... nothing.

NYSE Volume 1,250,822,000
NASDAQ Volume 1,989,322,000

Thursday, September 11, 2008

Oil, Gold Lead Way Lower

Forget the stock market for a moment and take a look at commodities. Focusing on the major precious metals, gold and silver, and America's favorite, crude oil, we can almost see the demand curve turning negative by the minute.

Commodity prices worldwide are collapsing with the precious metals leading the charge lower. There are no support levels or pivot points in the recent decline of both gold and silver. From their highs, gold is down 26%, silver, 47%, oil, 32%

Today's closing figures in New York were yet another indication of the commodity rout. Oil finished at $100.87, down $1.71. Gold slipped to $745.50, off $17.00. Silver melted down to $10.56, lower by 34 cents per ounce. Declining value in physical assets such as gold and silver is not an encouraging sign for any investor seeking growth opportunity.

Stocks on the day made all or most of their gains all in the final half hour. Markets were markedly low in the first half hour of trading. The Dow was down 170 points by 9:45 am. The rest of the session was spent short-covering and no doubt pumping by the inner circle of government interlocutors and their agents provacateurs in the market.

Dow 11,433.71 +164.79; NASDAQ 2,258.22 +29.52; S&P 500 1,249.05 +17.01; NYSE Composite 8,011.25 +3.99

As evidence of the manipulative nature of the day's trading, there were more decliners than advancers, 3459-2840. The gap between new lows and highs expanded magnificently, to 731 new lows to a pittance of new highs, 57. One should not be fooled by today's gains. This is a very weak market under incredible stress. There were underhanded interests at work on the 7th anniversary of the World Trade Center catastrophe to ensure that stocks traded higher.

Volume was light, with about 600 million fewer shares traded today than yesterday.

NYSE Volume 1,375,594,000
NASDAQ Volume 2,298,872,000

Wednesday, September 10, 2008

Stocks Settle for Small Change; Metals Rocked

Following two days of extreme movement - one up, one down - the major indices settled into a positive trading range and held on to substantial gains before renewed selling interest in the final hour turned many stocks lower.

Dow 11,268.92 +38.19; NASDAQ 2,228.70 +18.89; S&P 500 1,232.04 +7.53; NYSE Composite 7,957.26 +86.11

The markets traded in herky-jerky fashion throughout the session but retained a positive bias. The massive sell-off into the close, however, had many shaking their heads.

Devoid of any consequential economic reports, traders were forced to deal with the one big headline of the day, as embattled Lehman Brothers (LEH, 7.24, -0.55) issued an earnings pre-announcement which was far worse than anyone expected. The company said it would show a third quarter loss of $3.9 billion, or $5.82 per share and would reduce its annual dividend from 68 cents to 5 cents. Lehman also announced the sale or partial divestiture of much of its other holdings.

Such news was expected, though few thought the devastation would be so complete. Lehman had traded above $60 earlier this year. The stock, like so many others in the financial arena, has lost a massive amount of value - nearly 90%.

With the bailouts of Fannie Mae and Freddie Mac still fresh in the minds of investors, Lehman's fall from grace was yet another dose of bad news for a market that can hardly bear any more.

On the day, gainers managed a narrow edge over losers, 3473-2797. New highs were scarce, with only 66 firms recording 52-week highs. New lows however, were in abundance. There were 545 of those.

More evidence of the popping of the commodities bubble appeared, as gold lost massively, down $29.50, dropping to $762.50 per ounce. Silver also was hammered, sliding 84 cents, to $10.89. Oil fell as well on futures markets, with a barrel of crude worth 68 cents less than yesterday, settling at $102.58 per barrel.

The liquidity crisis continues. Everything, from real estate to stocks to grandpa's coin collection are being sold off as fast as humanly possible with no end in sight. By the time most average folks get an idea that what they own is not nearly worth what they paid, it's likely to be too late and another round of forced divestiture will ensue.

Happy days... not here, not now.

NYSE Volume 1,549,186,000
NASDAQ Volume 2,288,587,000

Tuesday, September 9, 2008

Double Dose of Reality for Wall Street; S&P at 27-Month Low

Stocks rose briefly Tuesday morning, but a pair of economic reports on Pending Home Sales and Wholesale Trade and Inventories sent traders running for the sell buttons.

Word from the housing industry was as dreary as ever. The National Association of Realtors' (NAR) index for pending sales of existing homes dropped 3.2% to 86.5 from 89.4 in June.

At the same time that report hit the street - 10:00 am EDT - the wholesale trade numbers showed a marked increase in inventory levels and a slowing of sales in July.

The double-whammy hit Wall Street like a ton of bricks as the NASDAQ dropped below its July bottom and the S&P broke down to a new 2008 low and closed the session at its lowest level since June 2006.

Dow 11,230.73 -280.01; NASDAQ 2,209.81 -59.95; S&P 500 1,224.51 -43.28; NYSE Composite 7,871.15 -297.47

While the Dow held onto a mere 10 points gained from Monday, the losses in the other indices were severe, especially in the NASDAQ and NYSE Composite. The NASDAQ, which was up nearly 14 points on Monday, lost more than 4 times that on Tuesday, dropping almost 60 points. The NYSE Composite lost more than double what it had gained in the previous session. Those two indices constitute the broadest gauges, covering over 6000 individual stocks between them.

Market internals verified that the selling was indeed broad-based and rampant. Gainers were overwhelmed by more than 5-1 by declining issues, with the losers ahead by a score of 5303-1006. New lows continued to swell as new highs retreated. New lows led, 574-103.

The only safe haven was in bonds, which gained slightly, while commodities were blasted lower once more. Crude oil continued its precipitous decline, losing $3.08, to $103.26. Gold shed another $10.50, shattering the psychologically-important $800 barrier, closing in New York at $792.00 per ounce. Silver slid below $12.00, losing 35 cents, to $11.92.

With seemingly nothing but more bad news heading to Wall Street, there seems to be nothing more than investor resolve to keep markets from an all-out rout. Volume has not returned following the Labor Day recess, igniting fears that many market participants have already left for more guarded environs. The past two days' volume have been mirror images, and have been in the moderate range.

Prices, wages and the value of all assets are all now encountering the beginning of a deflationary spiral which will lead to more misery months ahead.

NYSE Volume 1,639,261,000
NASDAQ Volume 2,614,386,000

Monday, September 8, 2008

Fannie, Freddie Bailout Spurs Big Rally

Stocks rallied on Wall Street Monday after the Bush administration - via the Treasury Dept. - decided to take over troubled mortgage financiers Fannie Mae and Freddie Mac, though informed opinion sees the bailout not as the end of the credit crisis, but rather as just another, potentially more dangerous, chapter in the saga. (note: in the opinion article referenced, this phrase: "That is because these two banks are responsible for $5.3 billion (3.7 billion euros) of America's $12 billion (8.4 billion euro) total mortgage debt. That corresponds to one third of America's gross domestic product." is incorrect. "billions" should be "trillions".)

All assumptions aside, Fannie and Freddie had to be bailed out to avert what would have amounted to a worldwide credit implosion or meltdown of the entire financial system, and that simply could not be allowed to happen. In the end, the takeover by the government amounts to nothing more than thinly-veiled socialism by a government run by people who condemn the very mention of the word.

Surely, the maneuver to salvage what's left of our banking institutions is a noble one, although its likely to be clumsy in execution. If nothing else, the administration can be seen clearly for what it really is: a proxy and shoulder for the failures and overreach of Wall Street greed. These people are hypocrites of the highest order. Sadly, they are the very people entrusted with our nation's highest leadership positions.

Still, the stock market took the news with the same aplomb that a thirsty baby greets the warm nipple of a milk bottle. Markets worldwide rallied on the news.

Dow 11,510.74 +290.43; NASDAQ 2,269.76 +13.88; S&P 500 1,267.79 +25.48; NYSE Composite 8,168.62 +134.86

In other words, to paraphrase a joke told by the Republican VP presidential candidate, Sarah Palin, the lipstick was applied liberally to this pig. This was a highly politically-timed move by Republicans desperate to elect John McCain and salvage an already-Democratically-controlled congress.

While the headline numbers were impressive, the rally was not as broad-based as many may assume. The NASDAQ actually fell into negative territory during the session, and advancers were not dominant over decliners, leading by less than a 2-1 margin, 3913-2334. New lows raced ahead of new highs, 284-134.

Commodities moved in an unimpressive fashion. Oil gained 11 cents to $106.34. Gold lost 30 cents to close in New York at $802.50. Silver lost 26 cents, at $12.07 the ounce, perilously close to a key support and emotional price level.

The bailout of the mortgage market is by no means an end, but rather a necessary step by a desperate, entrenched government about to lose power. If there is any sanity left in this country, Republicans will be shown the door by voters in November.

NYSE Volume 1,768,852,000
NASDAQ Volume 2,600,347,000

Friday, September 5, 2008

Government Bailout (or, The PPT Rides Again)

Just when the whole world thought everything was going to hell in a handbasket, the manipulative meddlers of the financial underworld changed the tune.

Friday morning at 8:30 am, the Labor Department reported that US Non-farm payrolls shrunk by another 84,000 jobs, and the unemployment rate shot up to 6.1%, a five year high.

The news stories keep using the word "unexpectedly" when referring to the data, as though nobody thought that the economy would lose jobs for the 8th straight month or that the unemployment rate was rising. It's amazing that the mainstream media still considers most of the reading and viewing public stupid.

News flash for the AP, Reuters and the networks. We're not all stupid and some of us refuse to be fooled by innuendo, polls, charts, propaganda and other nefarious methods of fascist propaganda. Go tell it to someone who doesn't know any better. Oh, right, you do... worldwide.

In any case, it was another setback for stocks, or so it would seem as all of the major indices dropped into negative territory as soon as the opening bell sounded at 9:30. By 11:00 am, the Dow, S&P and NASDAQ had all shed more than 1% in value. It was beginning to look like another in the continuing saga of the slumping US stock market.

Of course, what with the incredible rock star status achieved by vice presidential candidate Sarah Palin over the past few days at the RNC, the government gurus simply could not have that, so up went stocks, thanks to our friends at the President's Working Group on Financial Markets (aka, the PPT, Plunge Protection Team) and their proxies in the market: Goldman Sachs, Merrill Lynch, et. al.

By 1:00, all was well. The indices sporting just minor losses or gains, the stage was set to send every pinstriped suit-wearing, fundamentals-are-sound-speaking, broker and dealer on the street home happy as a lark.

By 2:40, all of the indices were into positive ground. The Dow, just before 3:00, was actually up 40 points. All that nonsense about lost jobs, a worsening housing condition and a profit warning from Nokia was put on the back burner. We've got a president to elect, and Wall Street want the McCain/Palin ticket, no doubt about it.

To get those two elected, the markets cannot sell off. They must maintain their positive posture and maybe even spark off a rally or two before November. Happy days... they're here again, folks.

At 3:10 pm: Dow 11,220.96 +32.73; NASDAQ 2,255.88 -3.16; S&P 500 1,242.31 +5.48; NYSE Composite 8,033.76 +25.51

It's rather disheartening and discouraging to those who believe in things like the constitution, rule of law, free market economics and honest elections to see such shenanigans continuing, but we, the American people, have been and will continue to be bought and sold by and for corporate interests, first, last and at every moment in between.

Unless we stand up and demand change.

For the day, losers beat out gainers, 3202-2977. New lows expanded their gap over new highs, to 479-47. That last figure is significant. The new lows have been growing by the day all week, while new highs are at extremmely depressed levels. Despite Friday's somewhat neutral headlline numbers, the internals are indicative of a market poised for further deteroration.

Volume continued at levels just slightly better than last week's anemic performance. The outright lack of trading interest is a collateral outcome of the credit crisis and does not seem to have any opportunity to abate.

Commodities continued to reinforce the defation argument. Oil lost another $1.66, to $106.23. Gold fell 40 cents, to $802.80, while silver lost 62 cents, closing at a multi-month low of $12.33.

NYSE Volume 1,199,665,000
NASDAQ Volume 2,263,084,000

Thursday, September 4, 2008

Major Pain on Wall Street

Stocks took one of their worst losses of the year on Thursday, as more economic news showed the US and world economy slowing to a crawl and new unemployment filings up sharply. Retailers also reported sluggish back-to-school sales at a time when investors are desperate for some cheerful news.

Dow 11,188.23 -344.65; NASDAQ 2,259.04 -74.69; S&P 500 1,236.82 -38.16; NYSE Composite 8,008.25 -261.00

Adding to the already dire circumstances and dour news was a note from PIMCO's Bill Gross, manager of the world's largest bond fund, saying that the government needed to do more to shore up not only financial markets, but mom and pops who are suffering under heavy mortgage debt.

According to Gross,
"Liquidity is drying up; risk appetites are anorexic; asset prices, despite a temporarily resurgent stock market, are mainly going down; now even oil and commodity prices are drowning."

Gross points out that financial firms have been dumping assets in an effort to maintain liquidity in the absence of a stable lending environment. With credit markets close to a a state of seizure, financing has become almost non-existent in corporate and capital markets.

Interestingly, those same points have been made right here on this blog for many weeks and months. What Gross sees is nothing more than worldwide asset deflation and massive wealth destruction, the same circumstances that held sway during the Great Depression.

Gross' comments are interesting in that he is urging even more government interaction. These kinds of suggestions from a person of his stature suggest that a full-blown economic crisis is at hand. While the government can assist in many ways, others are suggesting a "laissie faire" or "hands off" policy to allow the excesses to be worked off by the markets.

Naturally, neither policy alone is correct. The government, through the Fed and Treasury, is acting as well as one could expect under such extreme pressure. Having a lame duck president and a congress focused on nothing more than the upcoming elections isn't helping matters, and it's unlikely that Americans, investors and financiers will see any relief from falling asset prices any time soon.

It will be January before a new president and congress is sworn in and another 60 days - at the very least - before any meaningful legislative action would take place. Expectations for a very slow 4th quarter and 1st quarter of 2009 cannot be underestimated. It will be something of a miracle if stocks don't decline another 10 to 20% by then.

Whichever candidate succeeds in taking over the White House - be it Obama or McCain - he will inherit the worst set of economic circumstances since FDR. Burgeoning federal debt (nearing $10 Trillion), extreme deficits, continuing job losses and an economy limping toward collapse await the winner. Godspeed to whomever it may be.

On the day, declining stocks overwhelmed advancers, 5108-1144, nearly a 5-1 ratio. New lows dominated new highs, 401-54. What's amazing is that any stocks reached new 52-week highs.

Volume, though better than the past two weeks, is still on the light side. Investors and large funds are holding back as best they can, seeking to avoid an all-out panic, though today's activity bordered on a crash with losses on the major indices right at 3%.

Deflating commodity prices continued without pause. Oil dropped another $1.46, to $107.89. Gold fell $5.00, to $803.20. Silver slipped a penny to $12.94. Further slippage in the metals may produce a rout, as much of the buying in gold and silver was speculative and near the top. With most of those gains already wiped out, investors in losing positions may soon capitulate if some stability is not brought to bear. Without any support apparent, gold could easily fall to $600 and silver under $10. At those points, speculators may become much more interested, though by no means would those levels constitute bottoms.

Speaking of bottoms, the Dow is now within 200 points of the July lows. The NASDAQ is also less than 100 points from its March 10 low of 2169.34, while the S&P 500 is dangerously close to its most recent bottom of 1214.91 at the close on July 15.

Since no bottom has yet to be put in place, expect these levels to fail, and soon. Tomorrow's Non-farm employment report is likely to show another 60-80,000 jobs lost in the month of August, triggering more selling. Today's action may be seen as prologue to the 8:30 am release of the employment data.

NYSE Volume 1,301,593,000
NASDAQ Volume 2,360,495,000

Wednesday, September 3, 2008

Wall Street: Dazed and Confused

Things are still getting back to normal on Wall Street, where investors and traders are beginning to come to grips with the realities of the 21st century economy.

America isn't what it used to be. At least not what it was just ten years ago, when jobs were plentiful, profits were soaring and dotcoms were popping up all over the place. It was a wonderful time, the 90s. So much has changed since then.

On this day in 1998, the Dow closed at 7682.22, the NASDAQ at 1571.86. The explosive and final phase of the bubble was still more than a year away. Just 18 months later, both indices would peak and subsequently collapse, with the NASDAQ, the home of the "new economy" stocks, taking the brunt of investors' wrath.

Here we are, though, 10 years out, and things just don't seem that much better. Take a look at where we closed today.

Dow 11,532.88 +15.96; NASDAQ 2,333.73 +15.51; S&P 500 1,274.98 -2.59; NYSE Composite 8,269.25 -27.72

Are Dow and NASDAQ stocks really worth nearly 50% more than they were in 1998? Probably not. Their earnings certainly don't justify that kind of valuation. They are priced that way for a number of reasons, none of them simple, but two of them obvious. The value of the dollar in relation to other currencies has fallen dramatically since then and inflation has shrunk the value of the dollar in the US by as much as 30% during that time. You can still buy a lot of good things for a buck in the US. A McDonald's double cheeseburger, and all the things you can find in the thousands of "dollar stores" which dot strip malls across the country.

But stocks? No. A dollar will not buy you a share of any "good" company. Not those listed on the NASDAQ and certainly not one of the Dow's blue chips.

But all that is about to change. $100 will buy you 100 double cheeseburgers, enough to feed a family of four for more than a week. With that same $100, you can buy more than a share of any Dow stock, except one: IBM, currently in the $118 range. Now a share or two or three of stock won't feed anybody for any length of time, but it may be worth more in the future.

Ah, the future. That's the ticket. IBM was selling for $121 per share 10 years ago, and it split 2-for-1 in 1999, so it's worth a little more, but you have twice as much of it and you would have raked in 10 years of dividends to boot. A good deal, I guess. How about Citigroup? On this day in 1998 it closed at $41.13. Today it ended at 19.61. But it split twice, 3 for 2 and 4 for 3. So you have almost twice as much, even though it's worth more than half less. Not so good.

Coca-cola? No splits, but in 1998, it was at $61.80 per share. Today, 51.66. Less, despite the dividends. There are many more just like that and worse.

The point is that the averages and indices aren't telling the whole story. As a country, we are worse off than ten years ago, in many ways, but especially financially. Wall Street just continues to exist in denial, but soon, almost all stocks will be worth less than they were ten years ago. Adjusted for inflation, it will be even worse. It's economic reality.

And McDonald's will sell triple cheeseburgers for a buck.

On the day, advancing issues led decliners slightly, 3209-2975. New lows expanded their edge over new highs, 234-107. This is a bit of a sign that another deep plunge is on the way. We'll know more tomorrow and even more on Friday. In fact, Friday is shaping up to be one of those ugly 250-point loss days.

Oil continued to slide, losing 36 cents to $109.35. The metals continue to do their part to contribute to the burgeoning worldwide deflation. Gold lost another $2.30, to $808.20. Silver fell 20 cents, to $12.95. Both should be markedly lower in coming months.

Of course, as oil continues to dip, motorists are getting a little relief at the pumps. The average price of a gallon of gas was $3.68 as of Sept. 1, off from its peak of $4.12 in July. Now, since oil was $145 then and a shade under $110 now, how much should a gallon of gas cost. Using the ratio of 2.5 cents per gallon of gas for every $1 in the price of a barrel of crude, gas should cost $3.25 per gallon, or 87 cents less. It's not even close. How come?

Well, even if oil drops below $90 per barrel, gas will still cost more than it should because the oil companies have to keep making obscene profits.

John McCain promised.

NYSE Volume 1,208,861,000
NASDAQ Volume 2,115,416,000

Tuesday, September 2, 2008

Traders Return, but Result is Not Cheerful

Many investors returned to trading on Tuesday after a lengthy summer hiatus which included some of the lowest-volume sessions of the year, occurring in the final two weeks of August.

Right out of the gate, stocks were soaring, mostly due to the uneventful passing of Hurricane Gustav and the consequent drop in oil prices (down more than $4/barrel on Monday). The Dow was up nearly 250 point in the first 20 minutes of the session.

However, the exhilaration soon faded as economic realities reared their ugly heads. Stocks continued to slide all day, with all major indices eventually ending with losses.

Dow 11,516.92 -26.63; NASDAQ 2,349.24 -18.28; S&P 500 1,277.57 -5.26; NYSE Composite 8,296.97 -85.11

With the rise and fall of the markets came increased volume, though the markets could easily still be characterized as "sluggish."

Market internals were mixed. Advancing issues led decliners, 3211-3053, though new lows remained above new highs, 168-137.

What did stocks in on the first unofficial day of fall were economic reports from various agencies. Construction spending in July reportedly fell 0.6%, following a gain of 0.3% in June.

A reading from the Institute for Supply Management (ISM), which tracks overall manufacturing activity, was perhaps the most dour news of the day. The index fell to 49.9 in August after a reading of 50 in July. Any number below 50 shows a contraction, and, while the figure is barely negative, it is not what investors are seeking.

To complicate matters further, in the same report, inflation was seen to be slowing. The August reading of 77 was a far cry from June's 91.5, mostly related to the price of oil. The survey showed commodity prices falling many areas, including copper, corn, fuel oil, natural gas and soybean oil.

This is simply more evidence of a growing worldwide slowdown, which will take down all prices and affect all asset classes, from real estate, to commodities, to collectibles. Between the steep declines in real estate and the continuing diminution of credit, this is a scenario which only numb skulls and dunces could not have seen coming... but, after all, isn't that why we have the Fed... and CNBC?

Oil traded lower by $5.75, to $109.71, while the metals turned in another clunker as well. Gold fell $24.70, to $810.50. Silver was off 56 cents, to $13.15.

The coming global recession is going to be a crusher, especially for over-leveraged companies which have high debt ratios, low profit margins and nowhere to turn. Without financing, a good number of household name-types are going to be on the auction block within the next 6-12 months.

The bright side to the equation is that fear of home heating oil and natural gas breaking the budgets of many consumers this winter are probably unfounded. The giant utilities will have to make due with their already grossly inflated profits. The summer was cool by recent standards, and if the winter is not devastatingly cold, consumers will "weather the storm" as there simply won't be enough demand to hike prices.

As I've said before, everything is going to be a lot cheaper down the road. The trick is to have enough cash on hand with which to afford any or all of it. That's because the failed policies of the Republican-Wall St. junta have left Americans with fewer jobs and those that are available are lower-paying ones.

It will probably take the country four to six years to recover from the damage done by the current administration over the last eight years. Friday's Non-farm employment report will once again show losses of 60-80,000 jobs, continuing a trend that began in December of last year, and that should be more than enough data to convince Americans that four more years of Republican leadership will devastate the economy and the country.

If Obama beats McCain in the fall, the healing could begin by the second quarter of '09. If McCain is elected, expect nothing more than an outright economic and social depression.

NYSE Volume 1,146,155,000
NASDAQ Volume 2,045,446,000