Monday, July 11, 2011

Problems Abound: Jobs, Italy, Greece; Stocks in Retreat

Quoting from Friday's post: "Monday may, in fact, turn into a real blood-bath."

Well, it may not have been real blood, and it was more of a dousing rather than a bath, but stocks got hit pretty hard on Monday, following the less-than-impressive sell-off after the dismal non-farm payroll report which ended last week's rally in rather abrupt fashion.

The poor start to the new week was blamed - according to most pundits and exclamatory TV barkers - almost entirely on debt issues related to Italy, though there are more issues and problems popping up every day. The scapegoat Italians seem to be having the same problem most Western nations are: too much debt and not enough revenue.

What has the EU concerned is the not the size of the bailout which might be needed to shore up Italy's evolving debt crisis, it is the size of Italy's economy, the third largest in the European Union. Halping out smaller countries like Greece or Ireland are mere child's play by comparison. Italy is a nation of 60 million people, or, about 1/5th the size of the United States. That's a big problem, akin to having Texas, New Mexico, Arizona, Colorado, Wyoming and Louisiana all threaten to default on public debt at once.

The absolute fact of the matter is that the EU simply cannot go about printing up more Euros to bail out nation after nation. Sooner or later, the currency will become worthless and the nascent "grand experiment" of a unified Europe will fall completely apart. Already, there are signs of trouble in Germany, which has been acting - along with the US Federal Reserve - as the main funding source for bailout money, but in the end the major European banks will become victims of their own Ponzi scheme.

You see, money really doesn't grow on trees and just whipping it up out of thin air makes for instability and eventual anarchy. This is the situation in which we all are headed, and in a hurry. Would the financiers of the leading nations have confessed to their sins during the Lehman debacle in 2008, much of this would not be occurring, but, being the type of people who are prone to lie and cover up crimes and major blunders, world leaders would rather play this silly game of bailout rather than face the music (and jail time or guillotines).

Eventually, it's all going to implode into a global depression, rivaling or exceeding the pain and suffering of the 1930s. By some accounts, parts of the world, such as the Middle East, the Horn of Africa, certain counties in Georgia and Florida, along with Greece and Ireland, are already in a deep, never-ending depression. All that's keeping the rest of the world from falling apart is the non-stop printing of US dollars and the helping hand of uncle Ben Bernanke at the Fed.

While there are those who believe we in America will suffer a bout of hyper-inflation a la the Weimar Republic, the fact remains that wage growth is stagnant, money supply is insufficient to handle all claims in a mass default and the other income-producing part of the great capitalist triangle (money, labor, materials), that being materials, are still rather abundant.

We should all be preparing for the "great reset" in which everything becomes worth less than it was the day before, except maybe food, for that is the only requisite commodity essential to sustaining human life. One hates to be the messenger for bad news, but starvation and death may indeed become preferable, for some, to living under the thumb of a global police state in a condition of abject poverty. It's coming, and, as today's evidence and that of the past three years can attest, it's gaining momentum.

Incidentally, only eight stocks in the S&P 500 were winners today, and all 30 Dow components finished on the downside. Financials led the way, with Bank of America (BAC) and Morgan Stanley (MS) hitting new 52-week closing lows.

Here are the sad facts from fat-cat Wall Street:

Dow 12,505.76, -151.44 (1.20%)
NASDAQ 2,802.62, -57.19 (2.00%)
S&P 500 1,319.49, -24.31 (1.81%)
NYSE Composite 8,228.73, -181.46 (2.16%)

Losing issues trampled gainers, 5494-1122, the largest margin of losers to winners in quite some time, probably not since 2008. On the NASDAQ, there were, hard to believe, 49 new highs and 32 new lows. On the NYSE, a little closer to reality, 34 new highs and 30 new lows. The combined total of 83 new highs and 66 new lows masks the fact that many of the new highs were nothing but bear funds, inverse, triple leveraged ETFs and other derivative products. Even looking through the listings of new highs on the NYSE shows most stocks finishing well below their stated 52-week high. Surely, we can trust the Rupert Muchdoch-owned Wall Street Journal to not fudge statistics, right?

Volume was pretty weak, even for a massive down day, though this low level of trading has by now morphed into a new normal, so lower and lower volume figures should not be cause for alarm as market participants exit or are destroyed.

NASDAQ Volume 1,778,419,250
NYSE Volume 3,843,530,000

WTI crude oil traded down again, losing $1.05, to $95.15. Gold gained $7.60, to $1,549.20, close to an all-time high, though silver was punished once more for attempting to be regarded as money, dipping 85 cents, to $35.70 per ounce.

Not all the news was bad... well, yes it was, as Alcoa (AA) reported after the bell that it missed LOWERED estimates by a penny, at 32 cents per share as opposed to the consensus of 33 cents. Share were lower all day, preceding the after-hours announcement and continued to slide.

That is not a good way to kick off 2nd quarter earnings season.

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