Thursday, February 5, 2009

Bad News Rally? Really?

Once the opening bell rang, investors knew what to do after seeing the latest round of initial unemployment claims coming in at a record number, 626,000. All of the major indices dropped right out of the gate, building losses until right around 10:30 am, with the usual suspects, banks and related financial firms, leading the way.

Adding to the early Thursday thumping was the 4th quarter report from Cisco (CSCO), along with a very disappointing outlook for Q1 of 2009.

Additionally, a slew of retailers reported same-store sales falling in the range of 15-25% in January. Overall, there wasn't much good news about.

But, then word hit the street that “mark-to-market” accounting rules might be suspended to provide additional relief to banks and financial institutions. In other words, banks would be able to hide bad debts deep in the bowels of their books. Fine. Dandy. More phony accounting should be just the elixir to pull the nation out of its deflationary tailspin.

I have a word for what the government has been doing and continues to do regarding the banks. It's called "manipulation."

Massaging the bank's books aren't going to magically make the bad paper go away. Toxic CDO and MBS are bad, plain and simple. Allowing the banks to put them into a tier of liabilities or assets that doesn't realistically reflect their market value only delays the eventual reckoning. It was the suggested "mark to model" accounting, by which the banks were able to conceal their liabilities in the gobbledegook of their accounting which was largely responsible for the entire mess to begin with. Now, the "change agents" in the federal government believe that a return to those failed and false standards will somehow turn the tide.

Rubbish. Absolute garbage and trash. The government has no silver bullet. The answer is to allow the market to function by bankrupting all of the major players (Bank of America, Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley, et. al.) who are INSOLVENT. Instead, the government and Wall Street is conspiring to continue the rape of the American taxpayer by propping up these failed institutions. They are plotting nothing less than the destruction of the United States of America.

So, the market soars on the news. The Dow, in particular, turned a 110-point loss at 10:30 am to a 150-point gain just after noon. The other indices registered similar moves and finished at or near the highs of the day. Not surprisingly, the banking sector was up sharply.

Dow 8,063.07, +106.41 (1.34%)
NASDAQ 1,546.24, +31.19 (2.06%)
S&P 500 845.85, +13.62 (1.64%)
NYSE Composite 5,326.01, +83.26 (1.59%)

So, there you have it. Bad news almost all around, but because the feds offer easier accounting rules, everything is magically worth more today than yesterday. Not only is our government completely off the rails, they are taking all of the money with them through the corrupt, failed banking system. If Americans ever understand the truth rather than accepting the pablum spoon-fed to them daily by the equally-complicit mainstream media, there would be marches and sit-ins in Washington which would make the record crowds at Obama's inauguration look like a high-school picnic - that is, if the American people somehow rediscover their spines.

Of course, most of the American population has been placated by either poverty, the media, handouts (welfare and extended unemployment benefits) or a noxious combination of all three. Largely, the American public is a brain-dead, limp and nearly lifeless non-entity. They don't have a voice in their politics and those who actually understand what's happening are marginalized as kooks or conspirators. Our rights have been gradually stripped away (and not restored by the current administration) to the point at which we barely matter. Congress and the president do as they please. Wall Street openly steals billions of dollars. Americans pay their bills, struggle to make ends meet, try to get by, hundreds of thousands of Kentuckians are still in the dark and cold, recalling images of hurricane Katrina and the aftermath of New Orleans. Sick. Sick Sick.

Tracking the day's trends, advancing issues beat back losers, 4155-1308, but, new lows continued to hold a large edge over new highs, 288-12. Volume was very high, especially at the open (down) and into the close (flat) as the powers at work threw everything they had into the market to prevent the dissipation of the day's gains. The bull-bear struggle from 3:30 to 4:00 pm was monumental, even though the indices barely budged.

NYSE Volume 1,627,892,000
NASDAQ Volume 2,563,955,000

Commodity markets responded as would be expected. Oil rose by 85 cents, to $41.17. Gold was up $12.00, to $914.20; silver advanced another 28 cents, to $12.75.

Naturally, all the efforts of the pumpers and pimps of the market could not overcome the monumental resistance line set up at 8149 on the Dow... not even coming close. Friday morning will prove to be quite interesting. The Bureau of Labor Statistics releases their non-farms payroll report for January at 8:30 am. The consensus is for another loss of 525,000 jobs. ADP has already (on Wednesday) released their independent figure for January at -522,000 jobs for January. Whichever way the BLS decides to massage their figures will decide the line of the day's trade. Anything significantly over their "consensus" figure should cause a decline. Anything at or below the figure will trigger a monster rally. Either way, its the sucker trade of the week, or year, or... well, there have been so many sucker moves lately that it may just fall in line with the rest of them.

Suck it up, America. The oligarchs cannot be inconvenienced.

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