Friday, February 20, 2009

Stocks Hammered Again, But It Should Have Been Worse

After falling below key support on Tuesday, the Dow Jones Industrials, and US equities in general, were pounded down as fears of bank nationalization and unease over the future of the economy and even the welfare of the nation itself scared investors out of many positions.

While the technical damage on the Dow was serious, it should have been even worse, if not for subversive afternoon intervention by the usual corrupt cast of characters - the PPT, Goldman Sachs, Morgan Stanley, et. al. - which brought the Dow all the way back from a 215 point loss at 1:15 pm to a small gain at 10 minutes until 3:00.

At the heart of the matter was the fates of Bank of America and Citigroup, which suffered another day of crippling losses. At the low point of the day, Bank of America (BAC) was down 1.40, to 2.53, while Citigroup (C) fell 90 cents, to 1.51. On a basis unadjusted for splits, both were at all-time lows. Bank of America closed the day down a mere 14 cents, at 3.79, though Citigroup was not so fortunate, finishing 22% lower, down 56 cents at 1.95.

BofA CEO Ken Lewis was also subpoenaed by NY Attorney General Andrew Cuomo over the bonuses paid to Merrill Lynch executives in 2008. BofA took over Merrill under government supervision during the meltdown last fall.

It was only a hastily-prepared White House statement pledging a commitment to keeping banks in private hands that kept the markets from an all-out rout.

There's little doubt that the some kind of solution must be found for the ailing banking session, and soon. The public, however, has seen enough of bailouts and handouts, so the newly-installed Obama administration and Democratically-led congress must tread lightly.

Truth of the matter is that two of the nation's largest banks (and probably more) will have to be managed by the government, or somebody sober, for some time, in order to restore even a hint of credibility in the markets. There is also a distinct possibility that the government may not have sufficient power to prevent a complete collapse of an over-leveraged banking sector. In some ways, it is nothing more than the market hurrying the bankers' self-inflicted collapse.

Yesterday's rant by Rick Santelli at the Chicago Board of Trade (Feb. 19, 2009) on CNBC created no small sensation across the blogosphere. One of his more poignant remarks was his this gem:
You know, they’re pretty much of the notion that you can’t buy your way into prosperity, and if the multiplier that all of these Washington economists are selling us is over… that we never have to worry about the economy again. The government should spend a trillion dollars an hour because we’ll get 1.5 trillion back.

Santelli was even called on the carpet by NBC's Brian Williams and Matt Lauer (NBC owns CNBC) on this morning's Today Show and put across the screen from his network nemesis, Steve Leisman, a puppy lapdog for the industrial-military-communications junta which rules the government and the nation. Santelli certainly has never backed down from a fight, and his performance on the Today Show was remarkably well-reasoned and honest with obvious middle-class populist overtones.

And now the censorship begins. While attempting to retrieve the code, I was initially met with a mention that the above-referenced video was no longer available on, a not-very-subtle attempt by the media elite to silence the truth and keep the public under wraps.. Don't be surprised if Santelli isn't quietly relieved of his duties soon or, more likely, continually marginalized. Nevertheless, as mentioned yesterday, the genie is well out of the bottle and the public outrage at just about anything and everything concerning government and big business will not be contained much longer.

Dow 7,365.67, -100.28 (1.34%)
NASDAQ 1,441.23, -1.59 (0.11%)
S&P 500 770.05, -8.89 (1.14%)
NYSE Compos 4,804.51, -76.65 (1.57%)

Internals were as expected, favoring declining issues over advancing ones, 4906-1775. New lows dominated new highs, expanding to new levels with 1119 new lows and a mere 25 new highs. The massive number of stocks hitting 52-week lows (1 in 6) have only been seen on days of extreme market turmoil, and today surely fit that bill. Volume was the highest in weeks, owing to options expirations, market intervention, usual trading and high levels of outright open executions on the sell side.

NYSE Volume 2,117,367,000
NASDAQ Volume 2,560,465,000

Commodities remained on their own track. Oil for March delivery closed down 54 cents, at $38.94 on the final day of that contract. Gold topped the $1000 mark, gaining $25.70, to $1,002.20. In concert, silver gained 56 cents, to $14.49. All food-related commodity futures were markedly lower.

The CPI figures released this morning demonstrated an increase of 0.4%, the first gain since July, 2008, though it is more than likely only an aberration in the continuing deflationary spiral.

Stocks should have finished much lower than they did today, which only means that they will fall further at some future date. Considering the level of angst in the market, in the public, and the ineptitude of government and corporate business to constrain the wealth destruction leads one to believe that the market is well into the third and most crucial phase of the bear market, total, utter, final capitulation.

All of the major indices finished the week with substantial losses. The Dow registered its lowest close since October 27, 1997.

For the week, the Dow was down a whopping 485 points, and closing in on a 50% decline from the October 2007 all-time high. The NASDAQ lost 93 points; the S&P surrendered 57; the NYSE Composite was down 402 points.

It's not a pretty picture and not likely to improve soon.

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