Monday, June 13, 2011

Stocks Up? Not Really.

The desperation, both on Wall Street and in the hallowed halls of Congress and at the white House, is becoming palpable and, if the whole sordid state of affairs of our economy were not so profoundly sad, laughable.

Today, the wizards controlling the High Frequency Trading (HFT) computers, which account for about 75% (some say it's more than that) of all stock trades, managed to send the broad indices up in the morning, down a bit in the afternoon and close nearly unchanged. This is a very neat trick, devised to scalp money from day-traders, hedge funds, momentum players and anyone else foolish enough to venture into the caverns of Wall Street.

What it is not, is indicative of a stable condition in the markets. The current environment is about as unstable as it has been since the fall of 2008, when the entire global financial system nearly fell off the rails. There is the condition of the Greek debt, which sorely needs restructuring and plans have come, gone, come back, been revised, altered, accepted, rejected, sliced, diced, proposed, failed, and eventually found to be lacking. Greece will default; it is only a matter of time, as will Ireland, Spain, Portugal and maybe even Italy, Hungary and other small countries, like Balarus, which already has revalued its currency. Ouch.

It's interesting to note that Belarus took the extreme measure of revaluing its currency in light of a current account deficit that was 16% of GDP. In the US, congress is toying with raising the debt ceiling, and if it does so, will likely result in a current account deficit that's at least 10-12% of GDP. We're getting closer, and we can do it, for sure. USA - USA - USA!

Today's flat line finish was a sham. Take a look at the shattered internals.

Dow 11,952.97, +1.06 (0.01%)
NASDAQ 2,639.69, -4.04 (0.15%)
S&P 500 1,271.83, +0.85 (0.07%)
NYSE Composite 8,017.06, +0.67 (0.01%)

Losing stocks led winners by a wide margin, 3918-2699. NASDAQ new highs: 32; new lows: 139. NYSE new highs 21; new lows: 90. The combined total of 52 new highs and 229 new lows marks the seventh straight day in which new lows have exceeded new highs and indicates, more strongly than ever, that this downturn is going to be deeper and longer than anyone on Wall Street of in Washington is willing to disclose. A few numbers have been bandied about, like 1000 on the S&P and 10,000 on the Dow as possible bottoms, though die-hard deflationists are looking for much lower figures, rivaling or even exceeding the lows of March, 2009.

Volume was, as usual, depressed and depressing.

NASDAQ Volume 1,854,694,875.00
NYSE Volume 4,102,367,000

In deflationist terms, there was good news. WTI crude oil fell by $1.99, to $97.30, the lowest price in month. Now, if drivers can just hang on a while longer, some of the price declines may begin showing up at the pump.

Precious metals were also lower, with gold coming down $16.80, to $1515.30, and silver once again breaking below $35/ounce, down $1.44, to $34.76.

The handwriting is on scrawled across the economic wall: No growth, no wages inflation, no commodity inflation, all assets are due for another round of devaluation. Hold, wait, then buy gold, silver, tools, arable land and other desirable assets.

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