Wednesday, March 31, 2010

Employment Data Bangs Stocks

People in the Bronx were probably wondering what that sound was right about 8:15 am, emanating from the financial district across the East River. It was the collective groans of investors heard upon the release of this morning's ADP Private Employment Report [PDF] for March.

The private data compiled by the experts at ADP should be held in much higher regard than the government's overworked and over-adjusted non farms payroll data, though it is not. Too many people have come to the erroneous conclusion that the government data is reliable, when nothing could be further from the truth. ADP, which, unlike the government, has no agenda to promote, offers a clear view of who's hiring, who isn't and in which sectors jobs are either gaining or losing.

This morning's report showed a decline of 23,000 jobs from February to March, and also revised February's loss from 20,000 to 24,000. So, the company has reported a total of 47,000 job losses in the private sector over the past two months.

And we're supposed to be in a recovery. The pundits and promoters on CNBC and in the financial press will tell you that employment is a lagging indicator, but believing in this kind of lag is getting a little bit old, so to speak. The economy "officially" turned the corner out of recession in the third quarter of 2009 (Remember "cash for clunkers?"), so, according to the usually suspect "experts", the US began growing again in July of 2009 and has continued to accelerate, or so we're led to believe.

Third Quarter 2009 GDP, according to the final estimate provided by the BLS, was up 2.2%, and the 4th quarter was up by even more, something on the order of 5.6%, again, according to official government estimates, which begs the question of how an "estimate" can ever be deemed "official."

In any case, it's now been 9 full months since the economy began to "recover,' but nowhere are there new jobs to be found, accentuated by today's ADP report. Many investors are still not going to be convinced that the economy isn't growing until the government data is released on Friday, which happens to be the Christian holiday of Good Friday, thus, the markets will be closed as is the tradition.

Now, when the government comes out with its data, expected to show an increase of anywhere from 75,000 to 300,000 jobs, the real story will be underneath the headline number and it will say that most of the new jobs were temporary Census jobs which will end in August. So, the big question for tomorrow is whether investors will come to their senses and realize that the March jobs number is, in reality, going to be pretty much a stinker, and get out of he way of the coming sell-a-thon, or will they stand fast, close ranks and defend their stakes in corporate America?

The answer will be provided within the next 24 hours, but I'm betting, based on today's down-up-down pattern, that stocks won't be affected too badly, only because our insider friends at Goldman Sachs, JP Morgan, Merrill Lynch and Citigroup will be there to backstop any precipitous decline, to say nothing of the clandestine work of the PPP.

It should be fun to watch, but, the truth of the matter is that jobs aren't gaining, and 9 months is an awful long LAG, somewhat unbelievable.

Dow 10,856.63, -50.79 (0.47%)
NASDAQ 2,397.96, -12.73 (0.53%)
S&P 500 1,169.43, -3.84 (0.33%)
NYSE Composite 7,447.80, -12.92 (0.17%)

Declining issues laid all over advancers, 3885-2575. New highs: 337; new lows: 52. Nothing unusual there, but volume was a bit higher than normal, an ominous sign for the Bulls.

NYSE Volume 5,221,368,500
NASDAQ Volume 2,398,859,000

Commodity traders may be in an even deeper state of denial than equity traders. Oil for May delivery rose another $1.39 today, to $83.76. Gold gained $8.80, to $1,113.30 and silver was up 20 cents, to $17.51.

This is where it gets tricky. The dollar index was down pretty sharply on the jobs report, which pushed commodity prices higher, though it's a fool's trade, because there's simply slack demand, no inflation and therefore, all asset classes should be discounted, not appreciated. The US dollar will rise and fall in the currency markets for a boatload of different reasons, most of them speculative, but the deflationary spiral continues unabated.

For a better perspective, US treasury bonds offer some clues, as they were driven higher today, pushing down yields, a natural occurrence following a weak economic report. The bond market is screaming double-dip, while the commodity and equity markets - which require much less discipline - are still lining up on the side of economic recovery. They both can't be right, and the smart money would side with the bond sellers, who must demand more in a weakened situation.

The US is in better shape than Europe, though not by much. Probably the best places outside the US to put money to work would be Brazil or India, whose economies at somewhat detached from the US-Europe-China triad.

Tuesday, March 30, 2010

Dow Breaks Above 10,900 and Nobody Throws a Party

It's a good thing that the stock market indices are not true gauges of the strength of the American economy - or maybe it's too bad - because, based upon recent performance, Americans would all be out dancing in the streets because our economic conditions appear so rosy.

Stocks were up again on Tuesday, and if you think this is beginning to sound like the proverbial broken record, it's because in the month of March, stock indices have posted gains on 17 of 21 trading days. With Wednesday being the close of the month and the quarter, be prepared for more of the same, as mutual fund managers perform the quadrennial rite of "window dressing" - buying stocks with good recent track records in a very slimy and lame attempt to lure more investors into their funds.

The managers buy shares of the good stocks at the end of the quarters, then prepare their prospectuses with the recently-purchased stocks highlighted, only they fail to mention that they've held positions in them for less than 30 days, often, much less, as in, a week or so.

It's just more of the same on Wall Street. The more one learns about the business of selling shares to largely unsuspecting, unsophisticated people with more money than they know what to do with, the more one gets the feeling that it's just one big scam designed to separate those people from their money, and, more often than not, it's very successful.

So, stocks were up today, but not much, because everyone is waiting for the monthly jobs report, delivered dutifully the first Friday of every month by Wall Street's main enabler, the government. On Friday, the markets will be closed, but the Bureau of Labor Statistics will release their widely-anticipated and heavily-massaged Non farm Payroll report for March, which will include upwards of 250,000 new, temporary Census jobs. Expectations are for an increase of 200,000 jobs, which, if it's only that many, will be a bust of sorts, considering the government is kicking in a quarter million all by themselves. Whisper numbers suggest something on the order of 300,000, which would be a blow-out figure.

Whatever number is released, it will surely be hailed as a sign that the economy is recovering, as is everything these days. A bird craps on a car: sign of economic recovery; LeBron James scores 40 points: sign of economic recovery; the world does not end: sign of economic recovery. You get the picture.

Dow 10,907.42, +11.56 (0.11%)
NASDAQ 2,410.69, +6.33 (0.26%)
S&P 500 1,173.27, -0.05 (0.00%)
NYSE Composite 7,460.72, -4.18 (0.06%)

Advancers beat decliners again, 3437-3109, ho-hum. New highs bettered new lows, 414-50. Volume continued to flatten out. Only those with nothing better to do were trading, as has been the case for months.

NYSE Volume 4,546,991,000
NASDAQ Volume 2,073,122,875

Oil was higher by 20 cents, to $82.37. Gold was lower by $5.80, to $1,104.50. Silver dipped 6 cents to $17.32.

It's all so tawdry and stupid. Invest for retirement, like you're going to actually be healthy enough to enjoy it, right?

Monday, March 29, 2010

The Economy Sucks but Stocks Keep Going Up

Stocks were up again today, and, truth be told, it's beginning to become a little bit sick and perverted, to think that US corporations are healthy and making money because they've been able to cut costs to the bone, costing US employees their jobs, or cutting the pay of those employees in order to please their investors. Soon enough, it will become truly sick and perverted, when these multi-national corporations begin to raise prices because they can't cut any more payroll or, like AT&T and Catterpillar, take huge write-offs and blame it on the increased costs of "ObamaCare," as they call it.

AT&T quietly announced late Friday that they would take a $1 billion charge because of all the evil new costs included in the heath care reform bill. One has to ask why they didn't mention this while the bill was in committee or on the senate and house floors. No, they just sat back and watched a billion dollars evaporate without raising their corporate voice?

Tell you what: any company that is that reckless with investor money should not be in your portfolio. If you own any AT&T stock, or the stock of any company that takes a write-off due to increased costs associated with the recently-passed health care reform bill, SELL IT, SELL ALL OF IT, SELL ALL OF IT NOW. They don't deserve your business, and furthermore, they're a sick, twisted bunch of creeps. Remember, AT&T was one of the companies which allowed the government unfettered access to YOUR phone calls, violated your privacy and probably broke numerous laws, but got away scott free. Screw them. They only care about themselves, not you, your cell phone or your land line. Just your money, that's all.

Not that I am particularly enamored with the health care legislation - I'm not - but AT&T is just using it as a scapegoat to cut employee benefits and/or hide other losses. Face it folks, these people are about as honest as Bernie Madoff's accountant.

Dow 10,895.86, +45.50 (0.42%)
NASDAQ 2,404.36, +9.23 (0.39%)
S&P 500 1,173.32, +6.73 (0.58%)
NYSE Composite 7,464.90, +61.32 (0.83%)

As usual, advancing issues outdid decliners, 4212-2245. There were 369 new highs and 42 new lows. So, nothing else has changed, except that volume returned to mostly insider trading. Participation levels are dropping like stones off a high bridge. It is possible that average people are awakening to the scheming ways of Wall Street after all. Most of the trading is being done by big banks, brokerages, hedge funds and mutual funds. Eventually, after they've fleeced the American - and foreign - public enough, they'll begin to eat each other's lunches and the market will be exposed for the grossly overvalued, manipulated joke it has become over the past two decades.

NYSE Volume 4,827,693,500
NASDAQ Volume 1,897,280,250

Oil was up $2.17, to $82.17, based on nothing but naked speculation and greed. Gold was up $6.10, to $1,110.30; silver higher by 48 cents, to $17.37, same reasons. Once again, in the face of a dawdling global economy and slack demand, prices continue to rise in stark contradiction to the "laws" of supply and demand.

Wake up, people. You toil all day, and sometimes part of your night, to do what? Pay utility bills, car payments, fuel, insurance and taxes. When that's all done you can look at what's left and Wall Street brokerages expect you to invest for your "retirement" or your kid's college education.

Get real. If retirement was such a grand idea, we'd do it when we're in our 20s or 30s not in our 70s and 80s. It's only because we're worth less as employees at that age: slower, less controllable, wiser, that companies want us to move along. You keep writing those checks. I'll keep telling you why it's a no-win situation.

Friday, March 26, 2010

Equities Break Down, Break Even

For the second straight day, a nascent rally in stocks was shut off by outside events, today's supposed culprit a South Korean military vessel apparently sunk by an enemy torpedo.

Who could be so brash, unkind, unthinking? Ah, yes, Kim Jung Il, that man everybody loves to hate, and the perfect scapegoat for any kind of unpleasantness. Last week I couldn't locate my car keys and, certain that the evil North Korean ruler was behind their disappearance, I rattled off a series of insulting emails demanding their return.

And it worked! The keys mysteriously showed up on the kitchen counter within minutes.

So, one can understand with all seriousness how the actions of a crazy, totalitarian slave-master would have such an immediate affect on all the stocks listed on the American exchanges. Surely, if North Korea wants to be provocative and warlike, then it can't be good for Proctor Gamble, Apple or any of the other 6000-odd equities trading on the NYSE or NASDAQ.

It just goes to show how ludicrous and deceptive the financial media has become. Once somebody comes up with an idea, it's run with, whether it makes sense or not, whether it has anything more to do with the value of stocks in play than the weather, or Tiger Wood's 9-hole score, or your kid's grade on a math test.

With analysis such as comes from CNBC or any of a hundred or more boutique financial PR firms or thousands of press releases, no wonder trading stocks is so complicated and so often seemingly without rhyme nor reason. That's why having a nice, healthy horde of cash, diamonds, gold and other nifty stuff you can sell is always a good idea. If the world gets even crazier than it already is, you might have something that somebody wants, and they'll pay you for the pleasure of holding onto it. Seems almost barbaric, doesn't it?

Dow 10,850.36, +9.15 (0.08%)
NASDAQ 2,395.13, -2.28 (0.10%)
S&P 500 1,166.59, -0.86 (0.07%)
NYSE Composite 7,403.53, -17.93 (0.24%)

Regardless of what happened off the shores of the Korean peninsula, winners and losers were nearly evenly divided, the final score being, gainers: 3288; decliners: 3194. There was a dearth of new highs, just 296 of them, as today marked the one-year anniversary of a rather substantial move in the markets, a 175-point gain on the Dow (to 7925), making comparisons to a year ago somewhat less pronounced. Volume reverted back to the norm, sluggish.

NYSE Volume 5,382,776,500
NASDAQ Volume 2,172,191,000

Commodity prices continued the divergence which began yesterday, with oil down 53 cents, to an even $80 per barrel, but gold up $11.50, to $1,104.20, and silver tagging along, higher by 17 cents, to $16.89.

The government officially pegged 1st quarter GDP at 5.6%, The University of Michigan's consumer sentiment index improved to 73.6, from a downwardly-revised 72.5 in February.

Nothing really mattered. It was the best of times; it was the worst of times...

Enjoy the first weekend of Spring. If you're in the North, you should have seeds already germinating; if you're in the South, sprouts; and if you're in California, apparently you're growing stuff not to eat, but to smoke. Shameful.

Thursday, March 25, 2010

Turn-Around Thursday: Greece, US $$ Bury Stock Gains?

Well, it's simply not all sunshine and roses out there after all. On a day in which market pumpers from the major brokerages were attempting to take the Dow over the magical 11,000 mark, turmoil in the Eurozone and strength of the US dollar killed all hopes of a smooth recovery.

The headlines from the various media would have you believe that investors are snapping up stocks like jelly beans on Easter morning and that the bad, old world of Europe, which just can't get its own house in order caused so much worry that everybody sold at once around 3:00 in the afternoon.

Folks, don't be silly. The selling began as soon as the dow crossed the threshold of 10,500, around 1:30 pm. There was no news at that point, except some rumors that Jean Claude Trichet, president of the Europen Central Bank, warned that the bailout of Greece should not involve the International Monetary Fund (IMF), a US export which has consistently stolen wealth from less-fortunate or less-well-armed nations. As it turns out, the EU will be in partnership with the IMF, with the latter handling 1/3 of the Greece debt solution. Good for us, though only if you agree with bullying smaller countries.

It's a working plan, without firm details, though Greece's senior notes are now graded as junk, BBB-. What happened at 3:00? Nothing, except that an ordinary time of day for heavy traders to make moves. And they did all move almost at once, selling, so as to lock in their profits from earlier in the session. This is nothing new. It is a normal trading day move, and nothing more. Reading anything more into a mid-session reversal is usually a bad idea, though this kind of thing could become more commonplace. If stocks continue to gallop higher, look for astute traders to take day-trade profits over and over again.

Dollar strength is good for the US economy, folks. Don't let anybody try to tell you otherwise. A stronger dollar means imports cost less. Sure, exports are more expensive and thus, less marketable around the world, but that shouldn't matter - either to you or most multi-national corporations - you don't export and the big companies nowadays have their manufacturing offshore, in other countries, where labor is cheaper. Besides, they're selling things like industrial tractors, nuclear plants and other extremely high-ticket items where price pretty much takes a back seat to other functions like delivery time and overall quality.

So, sure, the US dollar was marked up today, not because the US is in such outstanding shape, but because Europe is a basket case. US dollars just looked better by comparison, at least for the short term. The trend is positive for US consumers, maybe not for US companies as a rule, but, by no means is a stronger dollar anything but good.

Thus, trader sentiment, and the lust for a quick profit, had more to do with turning a 90-point move higher on the dow into a 5-point gain at the close, and a 25-point NASDAQ gain into a small loss. Tough cookies. Live with it.

Dow 10,841.21, +5.06 (0.05%)
NASDAQ 2,397.41, -1.35 (0.06%)
S&P 500 1,165.73, -1.99 (0.17%)
NYSE Composite 7,385.60, -22.56 (0.30%)

Surprisingly, volume was excellent, though most of the moves were made in the latter part of the day, when selling was the correct option. Losers outslugged winners, 3936-2583. There were 751 new highs to just 85 new lows.

NYSE Volume 6,429,545,000
NASDAQ Volume 2,589,351,750

The rise in the dollar shot dead a rally in oil and the metals. Crude for May delivery fell 8 cents, to $80.53. Gold, which was up sharply, closed with a gain of just $4.10, at $1,092.70. Silver picked up 10 cents, to close at $16.73 per ounce.

In two stories which have importance only in the context of a post-government era of semi-autonomous anarchy, California will vote in November to legalize marijuana and former Assistant Secretary of the Treasury and popular truth-telling writer Paul Craig Roberts said he is retiring from the writing business, ending his last column with the words, "As the pen is censored and its might extinguished, I am signing off."

Wednesday, March 24, 2010

BofA's Write-down Gambit

Bank of America, allegedly holding 1.5 million loans that are 60 days or more behind on mortgage payments, today announced a new plan designed to write down principal values on a variety of loans to their most troubled homeowners.

The most affected groups will be those who took loans that were largely responsible for the meltdown in the mortgage securities market and eventually, the larger economy, over the past two years: sub-prime, interest-only and other variable rate products.

Prompted by lawsuits which alleged that Bank of America "strung out, delayed and otherwise hindered" efforts to resolve mortgage issues on homeowners in the state of Washington, the nation's largest mortgage servicer outlined the new program, which at first glance appears to have some value, though the gamble is that by lowering principal on loans in which the property values are lower than the original purchase price - often called "underwater" - the bank will further depress real estate values amid a market that is already under considerable strain.

The bank's plan is somewhat crafty, in that it works down principal balances over a period of five years and is tied to homeowners continuing to make mortgage payments. While it sounds hopeful on the surface, the plan may only prove to drive home prices down further, especially if economic conditions remain subdued or worsen.

In practice, principal write-downs are usually a last resort for lenders, who routinely hold out for the original, agree-upon value at the time of purchase. However, such as are conditions across a wide swath of the US real estate landscape, the bank seemingly is agreeing to take a "haircut" on its investment. Under BofA's plan, investors in mortgages would not suffer actual principal losses, but they would not make as much as originally planned.

No matter what, a haircut is still a haircut, so the very next thing to expect are lawsuits by mortgage investors. Some have already commenced. The bank is in a box because of its lending practices back in the boom days from 200-2007, when regulators looked askance at all manner of exotic mortgage products and real estate prices skyrocketed because of the lax standards.

In effect, this just buys the zombie bank more leverage and time to sort through the incredible mortgage morass. Within weeks or months, expect to see more banks offering more exotic plans to remediate troubled mortgage loans. All of them will be met with skepticism, most of them won't go far enough, the end result being a further breakdown in prices for residential real estate.

Most of the major mortgage lenders - Citigroup, JP Morgan, Wells Fargo - in addition to BofA, are in an untenable situation between foreclosure and principal write-downs. Both solutions are wrought with conflict and offer no guarantee of a positive outcome. The best most of the banks can hope for now is that they aren't damaged too badly, though they have nobody but themselves to blame.

News of the bank's most recent maneuver was met with mostly positive reaction, though the real effects will not be known probably for years, if ever.

Adding to the real estate woes was a Commerce Department report on new home sales for February, which fell 2.2% to an annual pace of 308,000. That was the lowest figure since data has been monitored: 1963, when the price of a middle-class suburban home was close to $30,000. The number of new homes being built underscores the actual depth of the real estate collapse and augers for even further declines in home values. With median household incomes virtually stagnant since the 1980s, home values should not have appreciated as much as they did, nor as quickly.

A reversion to a level more in line with actual economic conditions now seems absolute. With household income struggling to keep pace with expenses, the correct path is toward lower prices, not just on real estate, but tangentially, on everything from garden gnomes to restaurant dinners.

The deflationary spiral the Fed, the government and Wall Street most want to avoid now seems to be what it always was: unavoidable. Efforts to stem the flow have only served to buy time, temporarily propping up prices on stocks, gold and assorted other assets, but now, as evidenced by the non-ending housing crisis and associated unemployment condition (at multi-year highs), the death dance can engage in earnest.

Truth be told, economists are grasping at straws when seeking solutions to stem deflation and depression. No good solution has ever been made available at any time, other than the traditional - and painful - exercise of writing down or writing off bad assets and bad debts. Be prepared for another three to four years of dismal conditions, though, as readers of this missive already know, there are a wide variety of ways to mitigate the damage and actually come away less-damaged than your neighbors.

Bank of America has now stepped over a critical line and will not be able to step back. Cries of "foul" from homeowners diligently paying on their mortgage obligations will be loud and resonant. In a relentless search for the bottom, prices will proceed downward at an accelerating pace over the next 18-36 months.

Governments and financial wizards can only distort the truth to varying degrees. eventually, Actions like Bank of America's and data like the February new home sales reveal the true condition and it is far from pretty.

As for Wall Street, reality may be setting in that the overall economy is being kept floating by bailout money, productivity gains and government debt purchases rather than real, productive enterprises. Stocks slipped early in the day and remained lower throughout the session.

Dow 10,836.15, -52.68 (0.48%)
NASDAQ 2,398.76, -16.48 (0.68%)
S&P 500 1,167.72, -6.45 (0.55%)
NYSE Composite 7,408.20, -70.56 (0.94%)

Declining issues outpaced advancers by a wide margin, 4471-2033. New highs came down precipitously, to 417, though there were still only 40 new lows. Volume was about normal, though slightly elevated off some of the low-volume days of gains lately.

NYSE Volume 5,284,420,000
NASDAQ Volume 2,309,833,750

Commodities were also feeling the sting of reality. Off a report of higher crude inventory, oil fell $1.30, to $80.61. Gold was whipsawed $14.90 lower, to $1,088.60. Silver plummeted 39 cents, to $16.63.

If any of this activity looks like selling, you may have it nailed. Stocks and commodities have been driven up by hope and market insiders, and their values are highly inflated. Another downturn in the economy is already underway. The media, government and especially YOUR BROKER - all co-conspirators in the worst deceit in the long history of finance - simply refuse to own up to the truth.

Be certain you fully understand the frail condition of not only the US economy, but the entire world to some degree, and weigh the implications as they relate to your specific conditions. Only then can you devise a workable plan of action that will save you from desperation and ruin.

Tuesday, March 23, 2010

Stocks Climb to Fresh Highs; Housing Still Slumping

I'll begin where I left off yesterday. My final words were:

"Wall Street will continue to trade in what it knows best: equities. And until there comes an alternative, they will continue to rise."

I have now no doubt attained the status of a genius, but I cannot explain the explosiveness of today's venture into equity-land, but I'll attempt to make some sense of it.

Stocks, without alternatives, will no doubt provide positive returns. Since there are few alternatives in today's environment - real estate is a mess, bond returns are paltry, art is illiquid, over-priced and risky - all the money is going into stocks.

Partially to blame for Wall Street's current bubbly stock markets is the near-complete meltdown in the mortgage securitization market. It's a two-pronged attack that has virtually frozen the market for what just 5 years ago was the whitest-hot money machine in the world.

First, Fannie Mae and Freddie Mac have already announced that they would be prepaying a large number of soured loans. In other words, investors will be paid a lump sum - the remaining principal - on loans delinquent by more than 120 days, decimating their long-term value and consistent cash flow. Once these and other quasi-federal agencies own the loans, they're combing through them, looking for discrepancies and hammering the banks that issued them. One such instance is a recently-filed lawsuit by the Federal Home Loan Bank of San Francisco, seeking $5.4 billion from the usual suspects including Deutsche Bank; Bear Stearns; Countrywide Securities, a division of Countrywide Financial (now Bank of America); Credit Suisse Securities; and Merrill Lynch (also Bank of America).

So, where's the money? And, where's it going? Simply put, there must be a lot of mortgage investors out there sitting on large chunks of cash, because Fannie and Freddie have no doubt begun the process of prepayment. Stuck in the middle are the large banks which originated the mortgage melee in the first place, having first to pay back investors and then, sweat out the heat from the G-men scouring the bad loans for errors, omissions or outright fraud.

It doesn't require a huge leap of faith to believe that both the investors who have been made whole (Here's a dirty little secret, though: those investors, including the banks servicing the loans, don't get hurt from day 1 when a mortgagor defaults if it's a Fannie or Freddie loan. The agencies make the payments) and the banks, each looking for places to make money might dip a toe into equities. The banks would no doubt be the more aggressive and the parties with more money to move, which makes the recent rally all that more suspect.

Loads of liquidity are thus fueling the stock market rally, and, as usual, the Fed is sitting on its hands, watching the bubble inflate. With the NASDAQ already back to the level before the economic collapse of 2008 and the Dow and S&P fast approaching theirs, shouldn't the Fed be raising interest rates to slow down the rampant speculation?

You'd think so, but the Fed is in a box. Any rate hike - even a tiny 25 basis points - would kill the stock rally. Worse, it would likely touch off discussions of the broader economy and the unseemly truth that jobs aren't being created, banks aren't lending and most consumers are still stretched pretty thin. Even worse, all of the recently-issued government debt would begin to cost more to service. The Fed is quite literally dammed if they do and dammed if they don't, but the Wall Street money-grabbers are having a field day.

The sorriest part of the story is going to be the ending, other than the idea that most small investors haven't fully participated in the most recent money party. They are still too scared of the markets after the horrifying events of 2008.

Major banks and brokerages are now in nearly-complete control of the stock markets, so they're not trustworthy. Most of the current financial commentary resides somewhere below the ethereal, along the lines of, "this or that stock is up; it must be a good buy."

The oldest adage on the Street is to buy low and sell high. Since the Dow was languishing around 6600 a year ago and today its closing in on 11,000, even a third-grader would know that now is not the optimum time to buy stocks.

During the housing boom, the attitude filling the balloon was that housing prices would always go up. We know how wrong that was. Now, it appears that stocks will continue to rise. I remain on the bearish side of that statement, awaiting the eventual collapse. We have gone too far, too fast.

Dow 10,888.83, +102.94 (0.95%)
NASDAQ 2,415.24, +19.84 (0.83%)
S&P 500 1,174.17, +8.36 (0.72%)
NYSE Composite 7,478.76, +59.74 (0.81%

Advancers pounded decliners, 4550-1942. New highs exploded to 757, to just 73 new lows. Volume was actually good, especially on the NASDAQ.

NYSE Volume 4,955,676,500
NASDAQ Volume 2,305,962,750

Oil drifted 31 cents higher, to $81.91. Gold also was up $4.20, to $1,103.50. Silver gained 9 cents, to $17.01. All three commodities remain stuck in a range they've maintained for close to 9 months.

The National Association of Realtors (NAR) announced that existing home sales slipped 0.6% nationally for the month of February, but that inventory of unsold homes rose 9.5%, the largest jump in 20 years. The increase is due to banks finally releasing some of their foreclosure inventory onto the market and the overall lack of qualified buyers.

The sales rate improved in the Northeast and Midwest, but fell in the South and West, which has generally been the story for the past two years.

Better? That's a no.

Monday, March 22, 2010

Health Care Passed, Stocks Gain?

As odd as this may seem, the world did not come to an end as of last night when the US House of Representatives voted to move forward on historic health care legislation. While the bill still must be returned to the Senate if it is to include changes made by the House, President Obama is prepared to sign the existing legislation into law on Tuesday, March 23.

For the 14 months that health care has been a debating point on Capitol Hill, Wall Street has watched and observed closely, amid pithy warnings of damage to health-related stocks and other dire consequences of the sweeping reform.

However, after a brief dip at the open, stocks rallied, led by some of the very insurance companies which were supposed to be hurt the most by the legislation. Tenet Healthcare (THC), Universal Health Services (UHS) and Aetna (AET) - all health insurance providers - were among the best gainers on the day, rather than being sold down the river by speculators who see evil intent in the reform bill.

There are any number of possible reasons for gains in health-related stocks, though the most obvious are that the reforms don't fully take effect until 2013 in most cases, and the taxes levied on providers was substantially scaled back in the final bill. In the short-run - which, overwhelmingly is Wall Street's primary interest - health insurance providers will not be negatively affected. They remain at the heart of the system, and they still have various loopholes with which to exploit the more onerous - for them - provisions in the bill. Further, congress has mandated that all American citizens MUST have some form of health insurance coverage by 2013, a boon to the providers, since they are the primary dealers in such products.

So, health care reform should more accurately be described as mandated taxpayer expense, as this legislation marks the first time American citizens will be forced to purchase something or else face fines. It's a national mandate, and one that surely will not go down easy. A handful of state attorneys general are already busy crafting lawsuits challenging the constitutionality of the bill about to be passed into law. The debate will rage on for months - if not years - more.

Dow 10,785.89, +43.91 (0.41%)
NASDAQ 2,395.40, +20.99 (0.88%)
S&P 500 1,165.81, +5.91 (0.51%)
NYSE Composite 7,419.02, +32.17 (0.44%)

The markets were of their own minds today. Advancing issues outflanked decliners, 4224-2291, while new highs soared past new lows, 486-42. All of this occurred while the dollar was gaining against other currencies, a sign of strength for the markets and somewhat of an aberration, though not entirely outside the bounds of imagination and reality. A strong dollar and a rising stock market are certainly not mutually exclusive. Volume was again not particularly strong, bringing back arguments that the rally is based more on hope and insider dealings than actual economic worthiness.

NYSE Volume 4,868,379,500
NASDAQ Volume 2,325,247,000

After posting large early losses, oil bounded into the positive for the day, closing higher by 57 cents, to $81.25. Gold fell $8.10, to $1,099.30, though losses were steeper earlier in the day. The same was true for silver, off by a dime, to $16.92.

The trade today was highly suspect, owing to the sharp decline (Dow down 50 points) and quick reversal. Apparently, there's more to health care, stocks and markets than Wall Street veterans are allowing us to know. Either that, or cheap money is still being employed to boost share prices. Until something better comes along, Wall Street will continue to trade in what it knows best: equities. And until there comes an alternative, they will continue to rise.

Friday, March 19, 2010

Dow Ends 8-day Win Streak

The headline pretty much says it all. Investors have absolutely priced in expected improved earnings for just about all of 2010.

During the 8-day run-up, Dow stocks added 227 points, but gave back 37 today. Off the most recent bottom on February 8 (9908.39), the Dow added 871 points, a pretty emphatic rally. Further gains should prove more difficult, though the continuation of easy money policies had made stock picking relatively easy of late.

Though there are still any number of headwinds, the Wall Street money machine seems to be humming along just fine.

Dow 10,741.98, -37.19 (0.35%)
NASDAQ 2,374.41, -16.87 (0.71%)
S&P 500 1,159.90, -5.92 (0.51%)
NYSE Composite 7,386.80, -56.77 (0.76%)

Losing issues surpassed gainers for the second straight day, 4383-2149. New highs were elevated again, at 499. There were 41 new lows. Quadruple-witching produced excess volume, as widely expected.

NYSE Volume 6,126,701,000
NASDAQ Volume 2,786,147,500

Commodities all took a nosedive on the day, with oil down $1.52 per barrel, to $80.68. Gold was not shining, off $20.00, to $1,107.40. Silver fell 39 cents, to $17.02.

The trade on options expiration seems to suggest that there are plenty of speculators in the market, many with similar mindsets. Future direction will depend largely on keeping the consensus positive, which has not proved very difficult of late. Most market participants are discounting a double-dip, further easy money policies from the Fed and a lengthy debate over health care moving forward.

In Washington, Democratic lawmakers continued to attempt to find the votes necessary to pass pending health care reform, as it has come to be known, but stripped out some of the taxes on medical device manufacturers and have watered-down the bill, to the delight of the Republicans. A vote on the house measure is expected by Sunday, though any resolution would be referred back to the Senate for further reconciliation.

The process has become entirely tiresome and tangled. Something is likely to come of it, though few regular Americans will notice any changes for at least six months.

Thursday, March 18, 2010

Strange, Uneven Day on Wall Street

With much of the nation's attention diverted from Wall Street toward the opening round of the NCAA Tournament or Washington's desperate dance to pass health care legislation, major stock indices made some odd directional moves.

The Dow vastly outperformed the other indices, with the NYSE Composite, the broadest measure, taking the largest loss of the day. Traders were busy closing positions on options trades, with quadruple-witching expiration tomorrow. Most adroit traders have already shut down for the week, with not much wiggle room remaining on options strike dates.

Dow 10,779.17,+45.50 (0.42%)
NASDAQ 2,391.28, +2.19 (0.09%)
S&P 500 1,165.82, -0.39 (0.03%)
NYSE Composite 7,443.57, -30.56 (0.41%)

Internals revealed the true nature of the market, which was hurriedly exiting positions. Losers led gainers, 3774-2685. There were 602 new highs and 42 new lows. Volume backed off from better activity earlier in the week.

NYSE Volume 4,785,140,500
NASDAQ Volume 2,091,388,625

Oil backed off a bit, losing 73 cents, to $82.20. Gold gained $3.40, to $1,127.40. Silver slipped 10 cents to $17.41.

The CPI, released prior to the market open, may have encouraged some selling as fears of deflation persist. The index was flat for the month of February, with many of the components showing losses. Initial unemployment claims came in at 457K, another cause for concern.

There are no economic released slated for Friday, and expectations are for a dull session, though traders should be alert to any abrupt move to the downside, which could turn into an avalanche under the proper conditions. There is little to trade on over the next 3-5 weeks, as 1st quarter earnings season approaches.

Wednesday, March 17, 2010

Extending Gains, Stocks at 18-month Highs

Oh, Happy Day! If you haven't bothered to pay much attention to this space, you should be well off following the seventh straight advance for the Dow Jones Industrials, which broke and closed above the January highs and now sit at their best levels since October, 2008, when the bear market took its most prominent downside path.

What this would infer is that the financial crisis is fully behind us, recovered from and prosperity is now priced into the market to a substantial degree. Never mind that high unemployment persists and that housing remains in the throes of its worst extended period since the 1930s, money - as measured by the Fed funds rate of ZERO - is dirt cheap and stocks are flying.

Instead of looking this gift horse squarely in the mouth and playing this leg of the rally for all its worth, some of us have serious doubts going forward, though naysayers during spectacular bull trends (this is a bear market rally) are usually shuffled onto the last trains to loserville. No difference this time around, as sentiment has grown overwhelmingly positive. Stocks are the only investment with little risk and high reward, and that's what on everyone's plate.

While those viewing the macro-economic condition as less-than-healthy and still riddled with structural time-bombs, short-term, stocks have provided a great deal of upside action and quality trading plays. Note that the word "trading" was substituted for "investment," as the latter is no longer viewed with much respect. The money is there for the taking today, and take it is what most traders will do.

One tiny detail many may have missed here is that Friday marks a quad-witching day in which stock index options and futures and individual stock options and futures all expire. Being that the betting (note "betting" rather than "investment") has uniformly been to the high side, insider market participants will conclude their self-fulfilling prophecy with healthy gains, just as they have nearly every month and on every such quadruple-witching event of the past four quarters.

Also of note is that the Dow Industrials have now confirmed the breakout by the Transports, keeping Dow Theorists firmly in the back of the bus until such time as another aberration is recognized and then swiftly reconciled. If you expected stocks to rise, then you've hit the bulls-eye, though the reasons for gains may matter more than the actual finished product.

In other words, with easy money, bullish sentiment and no headwinds blowing against them, stocks had little to do but wait until people bid them higher. It's all so neat and simple when a plan comes so sweetly to fruition, no matter the underlying fundamentals.

Dow 10,733.67, +47.69 (0.45%)
NASDAQ 2,389.09, +11.08 (0.47%)
S&P 500 1,166.21, +6.75 (0.58%)
NYSE Composite 7,474.02, +47.32 (0.64%)

The internals were possibly even better than the headline numbers, with 4328 advancing stocks to 2196 losing value. New highs exploded to 1073, versus 77 new lows. That's the largest margin of difference - in either direction - in 16 months, and the best showing for new highs since prior to the bear market which began in late Summer of 2007.

Volume was very strong, owing again to the quad-witching condition.

NYSE Volume 5,549,815,500
NASDAQ Volume 2,166,110,750

Crude oil traders must be thinking there's a boom coming soon, because their pricing is out of this world. Crude closed up another $1.23, to $82.93, close to 18 month-highs itself. Gold was not so lustrous, but still up $1.80, to $1,124.00. Silver closed higher by 17 cents, to $17.50.

A few of the less-noticed economic data sets from the past few days may shed light upon why not everyone is sold on the recovery story. Capacity utilization ticked up a fraction in February, to 72.7%, still horrible. In a robust economy, that number would be over 90%. Consequently, industrial production saw a gain of only 0.1% in February, barely moving the needle.

Housing starts fell to 575,000 in January, again, a feeble number, and PPI, released this morning, showed a decline of 0.6%, or, in other words, outright deflation. However, instead of considering this a portent of a weak, stumbling, or at best, stagnant economy, the take was to call it "tame inflation" as though inflation would magically re-appear in time to rescue the pricing power of businesses.

This bear-market rally has now gone on for 13 months with only two near-corrections of 9% - in June, 2009 and February of this year - hardly the kind of performance one would expect from economic conditions such as exist today. But, Wall Street does as it pleases, and what pleases it most is stuffing more money into it's already lavishly-lined pockets.

Party on, Garth.

Tuesday, March 16, 2010

Fed Does As Expected: Nothing; Stocks Gain

It all went as expected. With the Fed holding their key federal funds rate at 0-0.25%, and promising to keep it there for the foreseeable future, using the key words, "for an extended period" once again, traders were assured that cheap, virtually free money would continue to flow.

Not surprisingly, they bought more stocks, because, at least perceptually, risk has been reduced to almost nothing. Of course, Wall Street professionals are supposed to be the very best of the best as pricing risk, though their track record has lately been tarnished badly by the toxic mortgage, collateralized debt obligation, credit default swaps and bailout fiasco. Over the past five to seven years, the accurate discovery and pricing of risk has taken a back seat to greed and wealth.

The moral hazard has not been corrected, merely pushed out further by free money thanks to the Fed.

Dow 10,685.98, +43.83 (0.41%)
NASDAQ 2,378.01, +15.80 (0.67%)
S&P 500 1,159.46, +8.95 (0.78%)
NYSE Composite 7,426.70, +75.74 (1.03%)

Gainers sailed past decliners on the day, 4536-1994. New highs reached ratcheted up to 757, though new lows crept higher, to 75. Volume was better than most recent sessions, though that is in large part due to options quadruple-witching on Friday.

NYSE Volume 4,965,576,000
NASDAQ Volume 2,142,418,500

Going along with the general theme of weaker dollar, cheaper money, oil shot right back up to $81.70, higher by $1.90. Gold soared another $17.10, to $1,122.20. Silver gained 25 cents, to $17.33.

Everyone is hoping the the nascent recovery remains intact and economic conditions improve, though the overhang of housing (in a completely depressed state with no good outcome, unless you're a low-ball buyer with cash) and a stagnant employment market continue to exert pressure on any optimism.

Essentially, stocks are fine until they aren't. That's the message, though many companies have raised their dividends recently, in hopes that markets will respect their high rates of return and favor them over more speculative issues.

Monday, March 15, 2010

Oil Lower, Stocks Mixed, Senator Dodd Confused

Markets continued their pattern of going nowhere in a hurry on Monday, but oil futures traders may have tipped their hands, sending the slippery stuff back below $80/barrel.

In Washington, meanwhile, Senator Dodd doodled with the financial reform bill, making the Fed the ultimate protector of consumers, a laughable situation. Remember, it was Dodd, along with his house counterpart Barney Frank, who oversaw the destruction of Freddie Mac and Fannie Mae, watched with gaping jaws as Goldman Sachs and Wall Street hijacked the nation's economy and now thinks anointing the Federal Reserve as the head of a consumer financial protection agency is a grand idea.

Actually, the politics of the situation speak more boldly than the white-haired Senator from Connecticut (many of his constituents are in the financial industry). Having the Fed as a consumer protector is akin to hiring Tiger Woods as a marriage counselor. It may appear good on the surface, but the reality is that only the banks will be protected since they're the ones to whom the Fed is tied. The Fed is not a government agency. It is a PRIVATE BANK. Dodd's bill suggests self-regulation again, the very concept that dynamited the underpinnings of the financial industry over the past ten years.

In essence, Dodd's bill is about as useful as a fire extinguisher in a forest fire. Consumers will be protected to the extent that they distrust the banks and financial companies with whom they deal. If Dodd and his congressional playmates were serious about financial reform, the very first thing they'd do is re-institute the usury laws they helped decimate in the 90s, but that's a pipe-dream in today's environment. Congress is merely a patsy for the banks and the Fed. Consumers are pigeons, to be taken and swindled at every opportunity, including at the teller window and the voting booth.

The legacy of this and the past 12-15 congresses will be one of patronage and passivity. Not a single piece of financial or regulatory legislation passed in the past 15 years has improved the lot of everyday Americans. Banks and Wall Street have flourished while Main Street and the middle class has floundered in a sea of red ink, debt and tiresome politics.

Generally speaking, anything passed by congress these days should be ignored, especially since they can't seem to find a copy of the constitution anywhere in the Capitol. Dodd's proposed bill, like the health care legislation, protects the people who pay for their election campaigns. In Dodd's case, the financial industry; in the matter of health care, the pharmaceutical companies and health insurers get all the benefit, just like they did with Bush's prescription drug bill.

As mentioned in a post over a year ago, we have entered the post-government era in America. Real progress is being made behind the scenes in the underground economy which doesn't pay taxes, doesn't follow local, state or federal mandates and deals largely in cash. It now comprises most small businesses, home businesses, illegal operations such as drug dealing, prostitution, gambling and work-for-hire operations. If government would step back and get the hell out of the way, the American engine of progress that is the able-bodied unemployed, underemployed and off-the-books employed could set sail on a new chapter in economic history.

Americans are so keen on getting government out of their lives, off of their backs and away from their employment that more and more people are simply playing the non-compliance game. The number of individuals not reporting income, cheating on their taxes and/or simply ignoring all of the paperwork and hassle involved in dealing with government regulations is swelling by vast numbers. It cannot be tracked, it cannot be traced and it cannot be stopped. Quietly, Americans have begun their own revolution, in a very stealthy, entrepreneurial and innovative manner.

Fed up with Washington's political bickering and squabbling which produces worthless legislation, government employees who are paid 50-100% more than private sector counterparts with benefits far in excess of what they could even imagine to afford, and lack of prosecution of bank thieves in pinstriped suits, small business Americans will and are striking back at the heart of the government's grand swindle. Without money in the form of tax receipts, government ceases to hold power over individuals. Without funds, their projects will run into more and more deficits, eventually resulting in wage and benefit cuts to the rank-and-file, or layoffs, which will engender strikes, walk-outs and a final breakdown of the entire government/industry/financial complex.

The movement is well underway. Groups like tea parties are only the beginning, the euphemistic tip of the iceberg. This revolution will not be televised. It is hardly even spoken of, much less broadcast, but it is growing daily as pent up disgust and hatred of institutionalized mediocrity seeks an outlet. Americans always have fended for themselves and joined with others of like minds, whether the enemy be Germans in submarines, terrorists or well-tailored officials. Washington and Wall Street will have only themselves to blame when the realization of lower tax receipts becomes clear and evident. They have overstepped their bounds by an order of degree and the American public has begun to lash back with a fury usually reserved for rapists and traitors, of which congress and Wall Street has in ample supply.

Let there be no doubt. The American public is willing and able to break laws and conventions in order to save democracy and this current struggle - largely a financial one - is no different than the labor movements of the 30s or the war protests of the 60s. By November, with rancor drowning out campaign rhetoric, the voice of the people will wail the loudest by either disposing of incumbents or eschewing the polls altogether, as the issue is not Republican or Democrat, but politics as usual, which doesn't work, hasn't worked and never will work.

The struggle continues.

Meanwhile, in the caverns of Wall Street, confusion reigns supreme. With two of the major indices up and two down, there's an obvious lack of direction, though, just in case anybody cares to notice, the Dow Jones Transports and Industrials have diverged, as has the Dow and the NASDAQ. The NASDAQ cannot lead other indices higher. Every instance in which the NASDAQ has exceeded a previous high and the Dow did not follow has produced a nearly-immediate sell-off in all indices. Worse, the Dow Transportation Index, which broke to new highs last week, was not followed by the Industrials, a classic non-confirmation which spells disaster for the now over-extended bear market rally.

Thus far, the markets have resisted corrections, first, in June of last year and most recently in February, never falling into the -10% area that would indicate true corrective activity. Instead, the few players remaining in the bowels of the markets have intervened, producing a rally that is neither believable nor sustainable. However, since most Americans are now cheating the government in order to keep food on the table and heat in the furnace, don't be surprised if corporations haven't devised equally devious manners to inflate profits, hide losses and artificially grow earnings. The Ponzi scheme has become the norm for finances in the USA.

Dow 10,642.15, +17.46 (0.16%)
NASDAQ 2,362.21, -5.45 (0.23%)
S&P 500 1,150.51, +0.52 (0.05%)
NYSE Composite 7,350.96, -11.89 (0.16%)

Giving credence to the falsity of the markets, advancers were beaten badly by decliners on Monday, with losers ahead, 3791-2689. That's a notable divergence and should set off alarm bells in brokerages. The long-anticipated selling spree is about to commence. New highs moderated down to 475, but new lows fell to a mere 32. Trading volume was dismal, as befits an overbought market that cannot climb to new heights because the underlying fundamentals simply aren't there.

NYSE Volume 4,680,055,500
NASDAQ Volume 1,909,806,375

In another sign that the gloves are off and it's every trader for him or herself, oil slid $1.44, to $79.80, abruptly ending the three-week rally that brought it all the way to $83. The price of oil is inexorably tied to economic conditions. Despite the best work of hedge funds and market interventionists, the price of oil will someday revert to following supply-demand dictates from the market. That day cannot come soon enough.

Gold gained $3.60, to $1,105.10. Silver was up 6 cents, to $17.08 per ounce.

On Tuesday, the FOMC releases their latest policy dictate. They will change nothing and the market will, in turn, not react. Stocks are already pricey and cash is king. Sooner or later, the Wall Street moguls will find out that much of the paper they're trading is pure nonsense.

Friday, March 12, 2010

Sellers Creeping into Market

Call it what you will, but today's action was indicative - as all of the past week has been - of uncertainty about further stock market advances and profit-taking.

Stocks have stalled on low volume, though with the steady supply of cheap money being fed into the system, the small, fractional gains could continue, though sharper players probably have already exited profitable positions.

Dow 10,624.69, +12.85 (0.12%)
NASDAQ 2,367.66, -0.80 (0.03%)
S&P 500 1,149.99, -0.25 (0.02%)
NYSE Composite 7,362.85, +9.61 (0.13%)

Internal indicators are still positive, however, with advancing issues eking out a win over decliners, 3378-3127. That was the closest margin in days, if not weeks. New highs came in explosively, at 805, but the number of new lows also climbed, to 69 on the day. Volume continues to be stuck in neutral; very low participation is indicated.

NYSE Volume 5,506,876,500
NASDAQ Volume 2,035,983,000

Commodities were flat, with oil dipping 6 cents, to $81.24. Gold lost $1.20, to $1,107.00, and silver fell 17 cents, to $17.03. An interesting indicator is the gold-silver ratio, which has been out of whack since 2003, but on pull-backs, silver, with more industrial uses than gold, usually gets hit harder. It's an interesting dynamic. Silver will follow gold to the upside, but generally underperform it. On the downside, it may be instructive as a predictor of future gold moves. Since silver is more closely tied to the real economy, it goes to reason that it would feel the pinch prior to its cousin gold, which is almost entirely an investment instrument.

A couple of data points should have moved the market, and might have been partially responsible for the poor showing on Friday. Retail sales were strong in February, up 0.3%, but january was revised sharply lower, from +0.5 to +0.1. That revision may have put a scare into investors, sensing that the current numbers were likely overstated. If so, that would jibe with the Michigan Sentiment survey, which fell to 72.5 from 73.6 in February.

Additionally, inventories were flat when the expectation was for a noticeable build. It didn't occur, thus, skepticism prevailed, and the market doesn't appreciate any kind of uncertainty, of which there is more than enough to go around.

At least the weather is improving and can't be blamed for anything.

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Thursday, March 11, 2010

No Change Must Be Good

Nothing much of importance happened today, giving market participants yet another opportunity to do what they've been doing for nine of the last twelve sessions: bid stocks higher.

There must be something quite enticing about owning stocks nowadays because there seems to be no shortage of buyers. Whatever the reasons, stocks continue to add to gains, day after day after day. It's becoming something of a bore.

Suppose the congress went home for a month, two months, six months, or just simply hung around and enacted no new legislation. Suppose the Fed kept short term interest rates permanently at zero. Suppose government debt was paid for with more government debt and that banks could continue to keep poisoned, rotten assets off their balance sheets.

Add in real unemployment at about 16%, 15% of all homeowners either behind on mortgage payments or already in foreclosure.

We'd have exactly the conditions we have today, though how all of that relates to being positive for stocks or the more general economy is a quizzer.

As for that final piece of the puzzle, the 15% of the "better off" homeowners in America falling behind, that info comes via the Mortgage Bankers Association, a group which should know the reality of homeownership, in this Washington Post article from February 20, 2010. Maybe you missed it.

The key passages are these:

"About 9.47 percent of all borrowers were delinquent on mortgages during the fourth quarter, according to a survey. The number is down slightly from the previous quarter, the highest on record, but was the second-highest level ever seen. An additional 4.58 percent of homeowners were somewhere in the foreclosure process.

This means that about 15 percent, or 7.9 million mortgages, were in trouble during the quarter, according to the industry group. It is the highest level recorded by the survey, which has been conducted since 1972, and up from 11 percent, or 6.4 million loans, during the corresponding period in 2008."

That is simply not encouraging.

As for unemployment, the weekly initial claims data was released early today, showing another 462,000 people filed new claims in the most recent reporting period. There were also more than 4,500,000 people still collecting unemployment benefits and congress just approved another extension. There are people out there who have been receiving benefits since March, 2008. Maybe you know some of them.

The 9.7% unemployment rate the government likes to tout is a neat fabrication which doesn't include "discouraged" workers or those who have taken lower-paying part-time jobs. As claimed earlier, real unemployment is about 16% of the available labor pool. It's much higher for specific groups, such as teens and minorities.

Somehow, all of this makes stocks good investments. Sorry, but some of us disagree. Anybody buying stocks with real money these days is simply gambling, and much of what's out there appear to be bad bets.

Dow 10,611.84, +44.51 (0.42%)
NASDAQ 2,368.46, +9.51 (0.40%)
S&P 500 1,150.24, +4.63 (0.40%)
NYSE Composite 7,353.21, +25.54 (0.35%)

Advancers beat down decliners, 3690-2702. New highs beat new lows, 563-51. That gap will begin to slowly decline. By August or September, possibly sooner, new lows should retake the advantage. Volume continued at a trickle. Goldman Sachs alone is probably responsible for 30% off all the trading volume on the exchanges, possibly as much as 45%.

NYSE Volume 5,093,085,000
NASDAQ Volume 2,093,398,875

Commodity prices moderated. Oil only gained 16 cents, but is priced now at $82.25 per barrel. Gold was absolutely flat, at $1108.10. Silver gained 15 cents, to $17.17.

There will be a reckoning for the current rallying folly. And it really is foolishness of a high degree. Stocks are close to recent highs, so when were we supposed to buy stocks? When they were high? We all know the answer to that question.

Friday will bring some economic data. Retail sales for February, along with the Michigan Sentiment survey for March and January business inventories will cumulatively tell us that nothing is going on in one way or another.

Stocks will rise again.

Wednesday, March 10, 2010

Oy! Tech Keeps Stocks on the Upswing

Tech stocks continued to dominate the gainers once again as stocks continued their month-long ascent. The NASDAQ easily outpaced the other major averages. Investors are coming to realize that tech companies are more financially capable and less in debt than their traditional industrial, material or financial counterparts.

It goes to reason, since most of the strong tech companies - Apple, Cisco, Amazon in particular - are young and have little to no debt service, separating them in material ways from other companies which may be struggling with finances, debt service, bond issuance and legacy costs (pensions, health care, etc.).

The general economy is still somewhat in a confused state of non-denial. While most indicators are benign or improving - other than housing and employment (Is there anything else that matters?) - sentiment remains steadfastly cautious. It actually has set up a nice paradigm for traders, especially those with more guile and shorter time horizons. In other words, the majority of the market is running on momentum, a tricky mistress, which can turn on a dime.

So long as stocks continue to gain in value, I'll reassert that they're not sufficiently discounting the future, which looks horrid. The government's plan seems to be to continually kick the can further down the road, applying patches along the way. There cannot be stability or prosperity until the government sector cleans up its act and tackles the issues of debt and entitlements head on, something few elected officials wish to do.

Eventually, piling debt upon debt is going to cause an implosion and dislocation, as it did in the fall of 2008. Current policies are leading to more spectacular failures, as exposure is now greater and includes not only financial institutions, but government entities such as the Fed, Treasury, and the unmentionable messes contained within Fannie Mae, Freddie Mac and the soon-to-flame-out FHA.

Fixed income gains are increasingly scarce and many unstable. Witness the note redemptions by Fannie and Freddie on defaulted mortgages within MBS, tight spreads and few alternatives. Flat-lining fixed income is inducing more equity investment, forcing stocks higher, eventually to unsustainable levels. It's a no-win, unless you're completely in cash because of declining asset values almost everywhere else. The stock market is nothing more than a chimera, an abstraction of the global economy and plenty of opinions. Short-term gains are possible. So are permanent losses.

Dow 10,567.33, +2.95 (0.03%)
NASDAQ 2,358.95, +18.27 (0.78%)
S&P 500 1,145.61, +5.17 (0.45%)
NYSE Composite 7,327.67, +33.65 (0.46%)

Winners beat losers, 4325-2192. New Highs: 773; New Lows: 51. Volume was substantially better than recent sluggish sessions. Lots of stock changed hands, but movement was constrained.

NYSE Volume 6,089,594,500
NASDAQ Volume 2,502,965,000

Oil posted another ridiculous gain of 51 cents, to $82.09, despite another in a series of inventory builds. The energy complex is wickedly overpriced and reversion is a certainty. Current prices cannot be maintained with reduced demand levels. Gold fell $14.10, to $1,108.20. Silver dipped 3 cents to $17.31.

Economic data has been slim and incapable of providing direction.

Tuesday, March 9, 2010

Premature Celebration

Yesterday, all anyone could talk about was the one-year anniversary of the market bottom. This was all the fashion on America's financial network, CNBC, where the usual suspect hosts were gushing with numbers and statistics about the "rally" off the bottom from March 9, 2009. Jim Cramer, the Mad Money host and serial bull%*( artist, even adorned his set with a cake replete with candles.

Sad to say, but the celebratory theme was a day early, as today, by most calendars, is March 9, not yesterday, and the market was responsive, at least in the early going, as investors kept shoveling money into stocks, pushing the Dow up 60 points at its zenith.

However, right around 2:30 in the afternoon, some people were apparently having second thoughts, and the rally was truncated, eventually sending all of the major indices briefly into the red shortly after 3:00 pm. Cooler heads, we suppose, prevailed in the end, with stocks finishing with small gains on low volume.

One wonders where markets are headed now that the "recovery" is underway. Or is it? The stock market rally of the past 12 months was built on bailout money, cheap credit and arguably depressed prices. We stand today at something approaching fair value, yet bulls abound. It seems to be something approaching heresy to suggest that stocks should correct, take a breather or cool off in some fashion. That would not please investors, understandably, but these markets have been so hot for so long, values have become distorted and bubbles - those things that caused the '08 collapse - could be developing once again.

We don't have Alan Greenspan around to suggest that markets are experiencing "irrational exuberance." He's been replaced by the scholarly Mr. Bernanke, who's been forced into a no-win condition at the Fed with the federal funds rate at zero and the balance sheet bloated with toxic mortgage-backed securities (MBS) that still nobody wants to own at face value. It's likely that Mr. Bernanke would like to raise interest rates a little bit, but he is so bound to keeping them low and keeping the fledgling recovery going that he dare not make a move, at least not presently. Eventually, however, he must raise rates, and when he does, the chorus of booing and hissing from Wall Street will probably be heard on the Santa Monica Pier.

Of course, now that the double-dip argument has been roundly discredited, nothing could be better for stocks and the economy than a nice, relaxing hiatus. Profits could be taken and reinvested in other companies at lower prices, but that idea is still anathema to those who only know one way for stocks to go... up, up, and away.

Today's brief selling might be a clue for investors as to what lies ahead, not immediately, but maybe four to six months from now. If the economy isn't absolutely humming along by then, there will surely be a sell-off, so, let's make sure the pom-pom waving gets more furious and animated over the coming weeks.

Dow 10,564.38, +11.86 (0.11%)
NASDAQ 2,340.68, +8.47 (0.36%)
S&P 500 1,140.44, +1.94 (0.17%)
NYSE Composite 7,294.02, +1.49 (0.02%)

On the session, advancing issues held sway over decliners, 3631-2870. There were fewer new highs than expected, and fewer than yesterday, though their level remains elevated at 740. There were just 59 new lows, though these numbers may begin to fall into more normal patterns as comparisons will increasingly become less stark. Low volume remains a major issue, today being no exception, though it was better than most recent efforts. There simply is not the same level of participation or enthusiasm as there was prior to the collapse.

NYSE Volume 5,802,183,500
NASDAQ Volume 2,558,147,000

Commodity market did actually act somewhat rationally today. Oil lost half a buck, to $81.37, still overpriced by almost any metric. Gold lost $2.20, to $1,121.80, but silver gained 6 cents, to $17.33.

The paucity of economic data leaves investors with little to trade upon, making major moves in either direction difficult, though the bulls remain firmly in control.

Monday, March 8, 2010

NASDAQ Trading at 18-Month highs; S&P Streak Ends at Six

A year ago tomorrow, the NASDAQ bottomed out at a closing price of 1268.64. With today's finish, it has gained a whopping 84% from the low, so, one must ask just how much more upside is there left?

Investors seem to be pondering that on a daily basis, picking stocks with much more care than in the pre-Lehman days, another level the NASDAQ has surpassed. The last time the index was at this level was September 3, 2008 (2333.73), but it is only 18.5% below the high of October 31, 2007 - the last market top - of 2859.12. It's difficult to imagine that the investments underlying the NASDAQ would be worth 81% of what they were before the market collapsed and the world realized that asset values were over-inflated, but, apparently, the mindset of the typical trader in tech believes in the marvels of technology and the value of equity in these companies.

Being realistic, any group of stocks which gains 84% in a year is probably overvalued, but the inverse is also probably true: that the same group of stocks should probably not have lost 55% in value over an 18-month span. Since neither of these scenarios are normal, the idea that the stock market is in the middle of an extraordinarily perverse period would be an astute observation. When normalcy returns (whenever that may be, possibly never), a reversion to the mean would be the order of the day, putting the entire NASDAQ market at a level approaching the midpoint of the extremes, or, right around 2063.88.

The timing of such an event would again be conditioned on the time-lines of both the fall and subsequent rise: 18 months to the downside and 12 months of gains, making the midpoint to attain equilibrium at half of the derivative times of those, or 7 1/2 months from tomorrow (the midpoint between 6 and 9 months). Checking the calendar, we should expect the NASDAQ to close around 2063 on or about November 10, 2010. (Make sure to mark that date and this post and check back)

The preceding was issued to show just how absurd and arcane any and all quantitative or qualitative analysis of the markets can be. You can go ahead and believe the concoction that spewed out of the top of my little pinhead or just chalk it up to more internet nonsense. The upshot is that I'll probably end up being as correct with my prediction than 50% of the other analysts, name-droppers and outright frauds who populate the stock media today. It gets worse with forex and options trading, so, consider yourself lucky that you are only invested in equities and thus, only mildly confused.

Dow 10,551.91, -14.29 (0.14%)
NASDAQ 2,332.21, +5.86 (0.25%)
S&P 500 1,138.31, -0.38 (0.03%)
NYSE Composite 7,291.58, -0.27 (0.00%)

Advancing issues outdid decliners by a margin of 3676-2857. New highs hit an expected extreme of 806, compared to just 70 new lows. The number of new highs should peak tomorrow or within the next few days at somewhere North of 850, but probably no higher than that. Once we cross the Rubicon that is the one-year anniversary of the market bottom tomorrow, all comparisons become more difficult. Gains will surely be difficult to attain and the chances for a major correction - or a mean revision, as outlined above - increase every day these lofty equity levels are maintained.

One should bear in mind that 2009 was witness to the most powerful stock market rally most of us will ever see in our lifetimes. Comparisons to earnings during that period when companies had cut staffs and expenses to the barest of bones will be particularly challenging. The time to exit the market is, if not now, shortly, unless you are fully recovered from the shocks of 2008 and early 2009 and still liquid. Then, shoot the works. Hang on until the end. Hey, it's only money. Your money.

Volume today was reportedly the lowest of the year on the consolidated markets. That should raise at least one eyebrow toward thinking that this latest rally off the small January-February correction are close to making a double-top. The NASDAQ is already in the process of making a double-top breakout, though the S&P and Dow are lagging, still below the early January highs. Likewise, the Dow Jones Transportation average has yet to confirm, though with Warren Buffet heavily invested in that sector, it's probably only a matter of time before it launches to new highs.

On the other hand, seasoned pros will take one look at the charts and tell you that you missed the move. They'd probably be right.

NYSE Volume 4,092,305,250
NASDAQ Volume 2,096,990,000

Oil continued its dazzling run to higher prices, up another 26 cents, to $81.76. Gold, however, slipped back $10.70, to $1,124.50. Silver also fell by 11 cents, finishing at $17.27.

Economic data is very light this week, and since we're close to the end of the quarter, earnings releases are practically nil. There isn't much to trade on these days except sentiment, which has grown to about as positive a level as we've seen in three years - perfect timing for a sell-off.

Buy tools, plant seeds, grow your own investments.

Friday, March 5, 2010

Snow Job

After hearing all week long how the major Northeast snowstorms in February were going to impact the non-farm payroll number, the group that compiles the data, the Bureau of Labor Statistics, flatly denied that the snowstorms materially affected their data in any meaningful way. They even issued a small note at the end of their report clarifying the situation.

What this shows is how little so-called "experts" understand the mechanics of survey data, especially one so widely distributed and followed. Some of these now-disgraced pundits were calling for job losses in the range of 150-200,000. Once again, what passes for economic knowledge and analysis in the age of instant everything is little more than 3rd grade nonsense.

When the BLS did release their report at the appointed time of 8:30 am, they showed the US losing 36,000 jobs for the month of February. Immediately, broker's phones were ringing off their hooks with orders to buy, buy, buy, and that's how the day went, as the media-driven stock markets posted one of the best gains of the year, boosting all major indices well into positive territory for the year.

Even more amusing than the 36,000 job loss being hailed as a positive development was the wild revisionism throughout the media complex. Even sites such as Yahoo Finance and changed their outlooks during the week, lowering expectations in advance of snow-related data. Expectations went from losses of 35,000 jobs on Monday all the way to -120,000 on Thursday and Friday. Supposedly, they may have appeared smarter had they just kept their predictions alone.

As the day wore on, the 36,000 decline in employment was being laughably hailed as another sign of recovery. The inverse is probably correct in this case, however. The numbers are going nowhere or actually in reverse. With January revised downward from 20,000 to 26,000 jobs eliminated, today's figure was just more of the same, only worse. But, as Wall Street and their media playfellows insist, any economic data is cause for a party, and party they did.

Dow 10,566.20, +122.06 (1.17%)
NASDAQ 2,326.35, +34.04 (1.48%)
S&P 500 1,138.69, +15.72 (1.40%)
NYSE Composite 7,291.06, +117.99 (1.64%)

Advancers beat back decliners by a healthy margin in a broad-based advance, 5315-1253. New highs punished new lows, 804-56, a margin of magnitude not seen since late summer. Volume, however, continues to lag. Participation in the market remains subdued, a troubling sign for the permanent bulls.

NYSE Volume 4,769,908,000
NASDAQ Volume 2,309,856,750

Commodities were split, though oil continued its amazing ascent, gaining $1.57 per barrel, to $81.78, its highest level in two months. Gold added $4.40, to $1,137.50. Silver was likewise ahead by 21 cents, to $17.39.

All indices were up for the week, putting the scorecard for weekly gains and losses at 4 up and 5 down.

How the markets manage to add to their recent gains is a very good question. Mostly, smoke and mirrors, rather than reasoned analysis will lend much of the punditry to express bullish sentiments on stocks and the economy in general. Apparently, all of the issues that were causing problems, like home foreclosures, unemployment, debt destruction, unfunded liabilities and growing government deficits are now being handled by the powers that be, the very same people who caused them in the first place.

Faith, usually reserved for deities, has now been transferred to the likes of Ben Bernanke, Barney Frank and Lloyd Blankfein. At least in Blankfein's case, he admits to doing "God's work," in his own words. The others are simply liars and/or hypocrites.

The faithful are being led somewhere, though the final destination is as yet unknown. I'll make a small wager that any move to the upside could be the beginning of the mother of all sucker rallies. Stocks appear to be if not at least fairly valued, over-valued. Recovery has been priced into every equity being traded, the perfect recipe for a bear attack. It may come at any time, or months from now, but the prospects for a full, robust recovery are still clouded by bailouts, Fed intervention, and a media with marching orders to sound the "all clear" alert.

Thursday, March 4, 2010

Stocks Surge on Slim News

Despite indications that Friday's non-farm payroll data is going to disappoint - or maybe because of that - stocks continued to trundle forward and have now put together the makings of a fairly nice week of gains.

All of the major indices are poised to post their third weekly gain in the last four and, as of today's close, all but the NYSE Composite are positive for the year.

Data which has been released this week has been mixed, though slightly positive overall. Initial unemployment claims dropped off by 29,000 in the most recent week, but are still stubbornly high at 469,000. A number closer to 300,000 would be indicative that layoffs have stopped and that re-hiring was about to resume, though market participants aren't holding their collective breaths in anticipation of that number. Factory orders showed an impressive 1.7% gain in January, following a solid 1.5% advance in December.

The canary in the coal mine, however, continued to be housing. Pending home sales fell 7.6% in January according to the National Association of Realtors (NAR), which, to almost nobody's surprise, was blamed on the weather, even though the worst storms of the season came in February, not January. Thus, any attempts to paint lipstick on the pig that is residential housing are likely to induce ridicule and groaning.

With the nation almost completely mortgaged to the government due to guarantees by Fannie Mae, Freddie Mac and the other alphabet soup names of agencies sopping up the upside-down mortgage market, there is little hope that the heartland of America's middle class is going to rebound any time soon. Jobs and housing continue to haunt the best efforts of government and financiers, like Freddie Kruger, who just seems to never go away for good.

While Wall Street can whoop it up over earnings and percentages, most of America is suffering, especially state governments. Roughly 4 out of 5 are going to need further assistance from the feds in closing gaping budget shortfalls this year, after being bailed out in 2009. Turning the sublime into the ridiculous, the federal government is about as bankrupt as most of Bernie Madoff's investors, so that, in effect, the states are borrowing borrowed money.

We have come to the point in our history that the obvious cannot be overlooked, though the media and government officials try their best to obfuscate the truth in hopes of retaining or gaining office. Adding together all of the debt - most of it piled on in recent years - and including the unfunded and underfunded mandates such as Medicare and Social Security, every American living today is in hock to the tune of about $430,000.

Any economist who tells you that the money will be paid back is simply a jack-ass lacking common sense. The incredible tax burden needed to hoist such a huge burden off the backs of American citizens would relegate today's and future wage-earners to a level usually reserved for indentured servants. Some make the case that due to the high tax burden already imposed, most Americans are nothing more than wage slaves already, a point that cannot be made too finely nor too bluntly.

While the mechanics of the economy whirr ever onward, the plight of the individual continues to deteriorate. Pay raises, once a commonplace theme in most business environments, have been all but obliterated since the late 1990s, except, of course, in government positions, where financial discipline has been abrogated and handed over to the debt-runners in congress and the presidency. The lower classes get welfare checks and other comforts from the largess of the Treasury; the upper class needs no such relief, having written all they need into the tax codes, leaving the vast middle class in a squeezed situation such as today's, where wages hardly cover the costs associated with common living.

Saving, that relic from the past that our parents and grandparents tried to imbue into us, has been replaced by debt, and that debt has exploded to unreasonable levels in just the past twenty years, threatening to destroy the entire fabric the social compact upon which our country was founded and currently operates.

Retirement, the biggest sham ever invented, is going to be thrust from the American lexicon within the next decade as baby-boom generation workers begin to add to the debt burden in increasing numbers. Taking away benefits from earners is still taboo in Washington, DC, though the decision to either cut benefits or raise taxes will soon be an unavoidable choice, probably within five to six years, if the union lasts that long.

The final insult to the idealist "peace and love" crowd from the 60s will be termination of Social Security for all intents and purposes. Benefits will still be doled out in some form or another, though the level of payments will be ludicrously low in comparison to what previous generations took out. Like all other social entitlement programs, Social Security and Medicare in particular are nothing more than vast Ponzi schemes, using current revenue to pay current beneficiaries. Within years, even possibly months, the balance will tip toward the recipients outnumbering the payers, sending the entire system further into default (It's already over the brink, though nobody will admit it).

What happens when the economy of a nation, brought down by debt burdens too weighty to maintain, implodes, is not a secret. The obvious first victims will be the lame and indigent, as government stipends are reduced or completely shut off. Next would be the chronically poor and illiterate, who do not possess enough brain power or initiative to fend for themselves.

The upper class will feel only slight pain, most of the anguish being sustained by the 60-70% of the population in the middle. Good jobs will be hard to come by, families will be forced to live together as in the Great Depression of the 1930s, and, though prices for everything from food to fuel will be forced lower (though that's arguable in the case of utilities and health care, which will raise prices on fewer customers to meet costs), few will be able to afford much more than basic necessities.

All of this is why it's important to know what your money is doing and where you are putting it to work. As explained recently, the only viable investments for the average middle class American today are cash, capital goods, and capital-producing goods such as food, fuel, seeds and tools of trade. All else is speculative and more than likely doomed. There are those who preach that gold will be the savior of assets and wealth, and that may be true, though most middle class people would more than likely have to sell any gold assets in order to meet day-to-day expenses in a post-crash economy.

In any case, there are trillions of dollars being fed into and out of the Wall Street stock machinery and today was a good day for them. Few of those who toil in the financial services industry have any idea of the train wreck that is just ahead, so, let their folly be your entertainment.

Dow 10,444.14, +47.38 (0.46%)
NASDAQ 2,292.31, +11.63 (0.51%)
S&P 500 1,122.97, +4.18 (0.37%)
NYSE Composite 7,173.07, +8.41 (0.12%)

Gainers outnumbered losers on the day, 3651-2790. There were 427 new highs to a paltry 27 new lows, as we approach the anniversary of the market bottom - March 9, 2009 - now just three trading days away.

NYSE Volume 4,448,901,500
NASDAQ Volume 2,062,605,875

Commodities took a bit of a breather. Oil was actually down 25 cents, to $80.62. Gold slipped $9.60, to $1,133.70, while silver fell 10 cents, to $17.23.

Tomorrow's release of non-farm payroll data for February probably won't cause much of a ruffle since expectations have been sufficiently dampened all week. It's a near certainty that the numbers will be worse than last month, and consequently blamed on the weather.

Markets and what passes for economic understanding have reached a new low, now that we can blame Mother Nature for our economic shortcomings.

Wednesday, March 3, 2010

Stocks Sucking Wind; Oil Futures Out of Control

The persistent pattern of sideways trade held sway one more day on Wall Street, despite the ADP private employment report offering a glimpse of Friday's government non-farm payroll data. The ADP report showed employers shedding 20,000 jobs in February, which was better than most analysts were seeking. Still, those numbers - and a rise in ISM service index from 50.5 to 53.0 from January to February - hardly moved the needle.

Naturally, there were a good share of both winners and losers, but the overall markets are about as stagnant as a Louisiana swamp. The problem is that these stocks represent real money, currently not working very hard for anybody.

Dow 10,396.76, -9.22 (0.09%)
NASDAQ 2,280.68, -0.11 (0.00%)
S&P 500 1,118.79, +0.48 (0.04%)
NYSE Composite 7,164.66, +28.69 (0.40%)

Advancing issues beat back decliners once again, 3575-2890, though the margin was not nearly as large as in recent days. New highs led new lows, 555-45. Volume was led by the NASDAQ. The NYSE continues to exhibit signs of flagging interest with low volume a daily occurrence.

NYSE Volume 4,475,734,000
NASDAQ Volume 2,474,973,500

Meanwhile, commodities, especially those in the energy sector, were spinning out of control. Oil shot up another $1.27, to $80.95, with April wholesale gas futures at multi-month highs of $2.25/gallon. Gold gained $6.60, to $1,144.00. Silver was up 25 cents, to $17.31.

The outlook for the February non-farm payroll data due out Friday morning continues to be clouded by forecasts that snow storms during the month may have skewed the data significantly. Also in play is the hiring of workers for the 2010 census. That was supposed to boost employment significantly over 2nd and 3rd quarters of the year, though the effect probably won't be felt until the march data is released a month from now.

Tuesday, March 2, 2010

Stuck In Neutral

By tomorrow morning's opening bell, there will be some sense of direction, and that sense is likely - based on observations from market sources - to be lower. The reason stocks may not be such good buys as of tomorrow morning is fear that Friday's non-farm payroll data for February will disappoint, and that tomorrow morning's 8:30 am ET release of ADP's private payroll figure will offer a sneak preview.

The Obama administration, rather than actually trying to mend the broken employment conditions in the US, has been resorting lately to downplaying expectations, which can only mean that Friday's numbers will be somewhere below estimates of the economy shedding 20-45,000 jobs. Some have actually suggested that the figure could fall into a range of 175-200,000 more job losses, of which the Obamanites will claim had much to do with recent snowstorms that plagued the Northeast through the month.

Well, if there's anything politicians can do well, it's disappoint, and blame it on the weather. Snowstorms, hurricanes, droughts, windy conditions do not affect a stable employment picture, and what we've got is an unstable one. Add to that the utter incompetence at the top - not only the administration, but congress as well, and there's a sure recipe for disaster.

In the meantime, investors and traders marked time in anticipation of the results. Wednesday's warm-up with the ADP report will surely shed some light; how much is unknown, though the gauge, issued at the beginning of each month two days prior to the government data, has proven highly reliable in its short life (less than a year).

Dow 10,405.98, +2.19 (0.02%)
NASDAQ 2,280.79, +7.22 (0.32%)
S&P 500 1,118.31, +2.60 (0.23%)
NYSE Compos 7,135.97, +35.22 (0.50%)

Making the tiny headline numbers appear understated, gainers outpaced losers on the day by a good spread, 4477-2023, better than 2:1. The number of new highs was once again elevated, at 624; there were only 48 new lows. Those number will change dramatically by the end of the month, more than likely in favor of new lows. Volume on the session was very strong on the NASDAQ, not so good on the NYSE.

NYSE Volume 4,788,700,000
NASDAQ Volume 2,683,460,000

Commodities are once again acting like demand is robust, though the current price regime is more about trading, seasonality and short-term profits rather than real supply-demand metrics. Oil was up $1.02, to $79.72. Gold gained $19.00, to $1,137.30, while silver shot up 59 cents, to $17.06. While pricing in the energy complex can be chalked up to seasonal conditions (doesn't fuel always go up when people drive more in the Spring?), the metals are retracing their gains from last year in a technical move that probably will end up pushing against new highs. At some point, gold investors will realize that their precious metal is in just another bubble, created by speculators and quick-buck artists. After rising for nine straight years, gold's price is reflective of two things: greed, and widespread distrust of current monetary and fiscal policies of countries using fiat currencies.

If the detractors of floating exchange rates, the Euro experiment and gobs of debt around the world are correct, the precious metals will be even more so in months and years ahead. The wild card in their calculations, however, is global deflation, which would undermine almost any asset, including gold, silver and platinum. Time will tell.

Monday, March 1, 2010

March Comes in Like a Lion

Following weeks of seemingly-relentless snowstorms and market turmoil, investors looked forward (maybe) to new gains with the coming of Spring - now just 19 days away.

The NASDAQ was the clear winner on the day, breaking loose from its moorings at the 50-day moving average and powering ahead for a return of better than 1.5%. The Dow was the laggard of the group, though it may be more indicative of where stocks are really headed: nowhere fast. Both the Dow and S&P 500 indices are stuck at or near their 50-day moving averages in anticipation of Friday's key non farm payroll report for February.

Overall, market conditions are vastly improved from a year ago, though the overhang of debt - federal, state, Greek, household and otherwise - still remains prominent on investor minds. The question remains whether the recovery is actually providing progress or is still a mirage, a house of debt cards that eventually must tumble. Most investors - for today, at least - see the glass as half full. A positive employment report would likely send stocks through the recent January highs, setting off even more speculative market play. The chances for such an event seem very good, given the government's recent effort to manage both expectations and the massaging of key data.

Current expectations are for job losses in February to maintain their level of between 20 and 50,000, which would actually be not very good news, so the government and Wall Street could tag-team to new levels if the data can show an actual increase in the number of people working for a living in the USA. We'll all know by Friday morning, but a good indicator will be ADP's private payroll report on Wednesday, also looking for a decline, albeit, a smaller one.

Meanwhile, cash remains king of all assets, especially with the US dollar continuing to gain versus most other currencies. While the US may have a bad cold, the rest of the world (especially Europe) is suffering from anything ranging from common flu to the bubonic plague.

Notwithstanding the NASDAQ, stocks may be hard-pressed to reach beyond levels seen on February 19, the last interim high, still overhead. Many stocks are approaching p/e levels usually reserved for hot tech stocks in early stages of growth. When stocks such as Home Depot are trading at 20 times earnings, there should be cause for caution and requisite concern. The markets are still at inflection points, and the general trend lower has not been broken.

That stocks may be stuck should come as no surprise after last year's spectacular run-up off the crash. We stand just 6 trading days away from the 1-year anniversary of the market bottom, a notable event.

Dow 10,403.79, +78.53 (0.76%)
NASDAQ 2,273.57, +35.31 (1.58%)
S&P 500 1,115.71, +11.22 (1.02%)
NYSE Composite 7,100.75, +65.71 (0.93%)

Advancers dominated declining issues by a margin of better than 3:1, with 5009 stocks higher and 1528 lower. There were 534 new highs, owing to the comparisons to last year, against just 48 new lows. Volume was very solid on the NASDAQ, but below average on the NYSE.

NYSE Volume 4,388,033,000
NASDAQ Volume 2,373,148,500

For a change, oil actually traded lower, down 90 cents, to $78.76. The metals remained about even, with gold losing 60 cents, to $1,118.30, and silver down 6 cents, at $16.46. More than a few analysts are calling for higher commodity prices, though the deflationists will stick to their guns, expressing the unpopular belief that prices of assets cannot rise in an environment dominated by deficits, debt and destruction of wealth, still ongoing.

Stock traders made the best of the day, though there really is still no major catalyst for another move higher. In fact, housing continues to stagger along, with construction spending falling for the third straight month, down 0.6% in January.

According to the Associated General Contractors of America, construction hit a 6-year low in 2009, led by huge declines in lodging, retail and office building. While not attempting to argue with the facts, private construction spending can actually get worse in 2010, as there are still no signs that the flagging economy is doing anything other than simply bumping along the bottom.