Monday, January 12, 2009

Stocks Down Again on Low Volume; Alcoa Losses Mount

Just as last week ended badly for US equity investors, Monday ushered in another round of depressing results.

Another week, another lost dollar. It's just the way it goes when you kill the golden goose, as the financial institutions, regulators and slimy government interlopers killed the Wall Street money machine.

That Wall Street is dead is almost an unmistakable fact. That people haven't noticed should be perhaps of more concern.

The banks - especially Citigroup, JP Morgan Chase, Goldman Sachs and Morgan Stanley (the last two recently having changed their status overnight from investment banks to bank holding companies) - are essentially insolvent. They leveraged their assets so far beyond the pale that US taxpayers have had to pony up cash to salvage what's left of them. Their reserves are maybe 1/50th of their lending, and their balance sheets, when the slime from level 2 and level 3 investments are included, are severely underwater.

Most people in the US and around the world do not understand the massive fraud that is being played out right in front of their eyes. Most of the banks which received TARP funds in the first round (about $350 billion) never lent a penny of the money, but rather used it to bolster their severely-damaged books. Obviously, it wasn't enough, as just today outgoing President Bush sent over a request for the remainder of the money (another $350 billion) to congress. As usual, congress will comply, adding some caveats in hopes that the banks will actually tell somebody, anybody, what they're doing with all that dough.

Don't hold your breath.

Dow 8,473.97, -125.21 (1.46%)
NASDAQ 1,538.79, -32.80 (2.09%)
S&P 500 870.26, -20.09 (2.26%)
NYSE Composite 5,551.03, -151.34 (2.65%

All major indices suffered losses, extending into the 4th straight down day, and the 5th out of 7 in 2009. Decliners led advancers by about 3-1, 5001-1383. New lows were ahead of new highs again, as usual, ad nauseum, 104-15. That gap is expanding, an ominous sign. Volume was pathetic, another signal that all is not well. Not only are investors sitting on the sidelines, many are just plain GONE, vanished, kaput. The level of declines since October have thinned the herd. At least those who have strayed may find greener pastures in foreign, or smaller, local markets. If they're smart, they'll invest in their own local economies instead of playing fat cat with the big boys.

NYSE Volume 1,305,193,000
NASDAQ Volume 1,785,911,000

The lower volume profile thus needs to be understood as a permanent fixture in the new, scorched earth market.

After markets closed, Alcoa (AA) kicked off earnings season by announcing a loss of $1.49 per share for the 4th quarter of 2008. The aluminum giant shed $1.19 billion during the quarter. With this first earnings call in hand, investors are bracing for one of the worst reporting periods on record.

While stocks were winding their way back down - all major indices are down for the year - commodities weren't exactly picking up the slack. Oil plummeted $3.24, to $37.59. Gold slumped $34.00, to $821.00. Silver dipped 57 cents, to $10.75. the ounce. Could be time to begin stocking up on silver bars.

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