Tuesday, January 31, 2012

Another Great Session for Equity Day-Traders as January Posts Positive

Yesterday, a gap lower at the open. Today, a gap up.

This is all according to plan, which excludes individual investors to the great benefit to those in the know.

Imagine being an insider. On Monday, you buy shares of your particular stocks of the day at the lows of the day, around 10:00 to 10:30 am ET and all day long, you watch as they gain in value. Then, on Tuesday, you sell at some high point right before the dismal Chicago PMI and Conference Board's Consumer Confidence number (more on thses later). Naturally, you ignored the poor showing from the Case-Shiller 20-city index, because nobody cares about housing, right?

You're a winner, in all aspects except for honesty, integrity and fairness. Worry not, because you or your firm made massive money all through the month of January, as the Dow rose 3%, the S&P gained 4% and the NASDAQ was up 8%.

Smashing! Except that gold and silver trounced your paper-made profits. Gold finished the month of January with a 13.9% gain and silver was up 19% for the month. And there's no chance of the metals going to zero and no counter-party risk. Well, golly.

As for that Chicago PMI, the market was looking for a number of 62.8, after December's 62.2 print. The reality was a poor 60.2, the lowest number since August, 2011, another indication that the holiday season in particular was something of an over-hyped bust and that the recovery continues to be choppy and not well-anchored. Bummer!

According to the Conference Board, consumer confidence was measured at 64.8 in December, but flopped to 61.1 in January. Double bummer!

The aforementioned Case-Shiller data, albeit back-dated, showed that home prices fell 3.7% from November 2010 through November 2011. Prices fell 0.7% (adjusted) or 1.3% (unadjusted) in November from October, as 19 of 20 cities experienced price declines. Phoenix was the only city registering a positive figure.

Not to worry. January's window dressing is complete and there's nothing to worry about heading into February... except for that nagging European debt crisis, Greece, the utter collapse in the Baltic Dry Index, and the looming showdown in washington over whether or not to extend the Bush tax cuts another 10 months, as congress, rather than deal with real issues, took the easy route in December and compromised to keep them intact through the end of February (they'll extend, as extending is part of their "extend and pretend" strategy).

No, no, nothing can go wrong. Let's just keep day-trading until...

By the way, volume continues to be dreadful, even though the Fed, through it's ZIRP to infinity policy, has forced fund managers into much more riskier trading scenarios than they normally would endeavor.

You can cite the January Barometer, which posits that "as goes January, so goes the rest of the year." except for last year, that is.

Well, keep trading stocks. They matter. Right?

Dow 12,632.91, -20.81 (0.16%)
NASDAQ 2,813.84, +1.90 (0.07%)
S&P 500 1,312.40, -0.61 (0.05%)
NYSE Composite 7,838.30, +3.89 (0.05%)
NASDAQ Volume 1,602,785,875
NYSE Volume 4,156,928,000
Combined NYSE & NASDAQ Advance - Decline: 3135-2441
Combined NYSE & NASDAQ New highs - New lows: 276-22 (extreme, poised for reversal or breakout)
WTI crude oil: 98.48, -0.30
Gold: 1,737.80, +6.80
Silver: 33.26, -0.27

Monday, January 30, 2012

Abundant Skepticism in US Stock Markets

There's nothing quite like a Monday morning gap down at the open to portray the absurdity of the modern US equity markets.

Stocks opened sharply lower (the Dow down as much as 131 points by 10:30 am ET), but then staged a day-long rally ending with mostly flat to slightly lower averages that had everybody but day-traders scratching their heads.

The reason day traders would be among the least surprised by the tenor of today's trading is that gap ups and downs have become somewhat the norm over the past few years and especially so in the last six to eight months. Shrewd day-traders are out by the close and ready with new positions at every open, so, the gaps in trading from one day to the next create boundless opportunities for profit.

And who might these day-traders be? They are not, as many assume, older, well-off types who sit in front of computers in their McMansions ticking off trades. They are more than likely to be hedge funds and the brokerages of the largest banks in the world, and therein lies the wickedness and fruitlessness of trading in today's markets for the individual investor.

Today's deep dive at the open was fomented by a couple of data points from the government that saw personal income rise by 0.4% in December, but personal spending flat for the same month. That translated into a savings rate of 4% for the average American, far beyond what the powers that be would prefer, but the flat line on spending in December meant that the much-ballyhooed Christmas spending spree was more hot air and bluster than reality and the US economy is still barely treading water.

Adding insult to the intelligence of the American investor was the fact that almost every other stock market in the world took losses on the day, the euro was sharply lower against the US dollar (normally a selling signal) and the Greece debt crisis - which was supposed to be solved over the weekend - continues to deepen.

Anyone thinking that today's action in equities was a sign that the economy is on solid ground probably also thinkis Bank of America is a good investment (paging Dick Bove) and that Newt Gingrich would do well as a presidential candidate against Barack Obama.

Our markets are permanently broken, manipulated and dishonest and until there are radical changes in the ways brokerages are regulated and separated, not only from their holding banks, but from the Fed, the government and the PPT.

Until then, beware of rallies off of sharp opening declines and huge gaps up at opens as well. They're nothing but openings for traders with more skills, more money and more advantage than the average Jane or Joe, and the movements of the market are nothing more than maintaining the illusion of stability until the elections in November.

Dow 12,653.72, -6.74 (0.05%)
NASDAQ 2,811.94, -4.61 (0.16%)
S&P 500 1,313.02, -3.31 (0.25%)
NYSE Composite 7,830.42, -46.19 (0.59%)
NASDAQ Volume 1,621,418,500
NYSE Volume 3,493,897,750
Combined NYSE & NASDAQ Advance - Decline: 1983-2611
Combined NYSE & NASDAQ New highs - New lows: 218-25 (still extreme, bordering on absurd)
WTI crude oil: 98.78, -0.78
Gold: 1,731.00, -1.20
Silver: 33.53, -0.26

Paying Bills

This guest post from Lewis Beck

I have started paying all of my bills online. It is so much easier and it keeps me more organized. I used to have a stack of bills that came in the mail and I would have to use several stamps and mail each bill back. Sometimes, if I was out of stamps, I would end up mailing my bills back late because I would forget to go buy more stamps. If my bills were late, I would be charged a late fee. When I pay bills online can do it immediately and I do not have to worry about if the bill is going to be late. I also just get an email when the bill is due, so I do not have to worry about getting so much mail that just sits on my counter. I do not have to worry about late fees or stamps. It is so much easier to pay my bills online. I am so glad that I have Satelite Internet Oregon. It has made my life much less complicated and I do not know what I would do without the internet.

Friday, January 27, 2012

4th Quarter GDP Up 2.8%; 1.9% from Inventory Build; Checklist for Peace and Prosperity

US markets opened the day with news that the first estimate of 4th quarter 2011 GDP came in at 2.8%, a tad shy of the 3.0% (and many higher) estimates from the punditry. That bit of reality got stocks off to a ragged start and the choppiness continued throughout the day with the NASDAQ the only positive index for the bulk of the session.

The saddest part of the GDP breakout was that 1.9% of the 2.8% gain came from inventory build, which, as experienced in years past, will be quickly pushed out the door in the first quarter of 2012 and not fully replaced. That sets up an extraordinary condition through the first quarter: that of teetering on the brink of GDP contraction. Everyone is aware of the situation, which is why trading volumes have been so weak and stocks now being used as short-term bets rather than investments.

Still, the always-bullish crowd on Wall Street still, according to the January Barometer, believes there are better days ahead. That is until the bad days come, which they surely will. The aforementioned barometer is an old adage that purports that market direction, as dictated by the change in the month of January, will remain the same throughout the year. Last year, January was strong, just as this year, but we ended the year flat, and, after April, and especially after July, it was mostly downhill, so, take the sage guidance of the January Barometer with as many grains of salt as your risk appetite will allow.

Full year 2011 GDP was a grand 1.575%. And that's probably a stretch.

Muddle, muddle, toil and trouble,

Huddle, huddle, masses under the bubble.

America's economy is not growing and that's a good thing, though only for selected groups, like those who have seen it coming all along, nascent Nihilists and, of course, those at the top of the food chain (damn bankers).

Finally, here's my checklist for peace and prosperity in one's life:
  • Paid for (free and clear) house to live in
  • Nice stacks of Precious Metals Guns & ammo Food in storage Garden Plenty of cash for six months expenses Solid understanding of the situation Don't give a rat's behind about upcoming elections Severe, deep-seated hatred of banks and government A business that keeps churning cash Clear conscience
Options include, sex slave, big dog to scare potential intruders, smokes (all kinds), liquor (you'll need it), home-brewing, wine-making or still (best of all worlds, all three), neighbors who may not fully comprehend the situ, but still are not a-holes, working computer(s). A nice collection of good books is always recommended.

Note that anything I-related, phone, pad, whatever, are not even optional. They're just future junk.

Since anybody who reads this blog is probably a notch or four above the teeming masses, we, as a group, should be exceptionally pleased that the system hasn't gone full retard into the eventual collapse, yet. Gives us more time to prepare for Armageddon, should it come, though we will be best prepared to fight off the zombies.

My advice: stick to your plan and work it. Hard. Tell those who think you're nuts (98% of population) to F-off. Fight like a gladiator for every penny and never lose faith in your own unique human ability, which knows only the limits you put on it.

Life is good and getting better for those who are prepared. The heck with the rest of the idiots.

Finally, two ideas in just four short words to mull over the weekend: Ron Paul. Short Google.

Dow 12,660.46, -74.17 (0.58%)
NASDAQ 2,816.55, +11.27 (0.40%)
S&P 500 1,316.32, -2.11 (0.16%)
NYSE Composite 7,876.60, -7.30 (0.09%)
NASDAQ Volume 1,685,430,875
NYSE Volume 3,822,956,000
Combined NYSE & NASDAQ Advance - Decline: 3540-1981
Combined NYSE & NASDAQ New highs - New lows: 235-18 (still extreme, but stalling out)
WTI crude oil: 99.56, -0.14
Gold: 1,732.20, +5.50
Silver: 33.79, +0.05

Thursday, January 26, 2012

Welcome to the Age of Financial Repression; Markets Fall, Metals Gain

This was truly a strange day in US equity markets. On the heels of Wednesday's Fed announcement that the federal funds rate would stay at 0-0.25% until the latter part of 2014 (read: as long as we need ZIRP to keep the economy from collapse) and blow-out earnings from Caterpillar (CAT), stocks opened sharply higher, but then nose-dived right at 10:00 am, after the Commerce Dept. reported that new home sales in December fell by 2.2%, to an annualized rate of 307,000. Additionally, the median price of a new house purchased last month declined 12.8% from a year ago. 2010 now stands complete as the worst year for new home sales since records began being kept in 1963.

On top of the earlier-reported initial unemployment claims spiking back up to 377,000 from an upwardly-revised 356,000 last week, not even the hope of endless largesse from the Federal Reserve could keep stocks in positive territory. All major indices ended in the red. By contrast, gold and silver posted solid gains.

A term one won't be hearing much on mainstream media is "financial repression," and if it sounds harsh, it's because it is, and it is the reality of much of today's economic world.

Here's a definition of Financial Repression from Investopedia:
A term that describes measures by which governments channel funds to themselves as a form of debt reduction. This concept was introduced in 1973 by Stanford economists Edward S. Shaw and Ronald I. McKinnon. Financial repression can include such measures as directed lending to the government, caps on interest rates, regulation of capital movement between countries and a tighter association between government and banks. The term was initially used in response to the emerging market financial systems during the 1960s, '70s and '80s.

Bingo. Another term for the collusion of business and government is fascism.

Welcome to the new world order. For a glimpse of who and what are destroying the value of capital and thus, your money, just take some time to view the goings-on at the World Economic Forum in Davos, Switzerland. Surely, George Soros, Mark Zuckerman, Jamie Dimon and a gaggle of billionaires have the worming men and women of the world's best interests at heart.

Dow 12,734.63, -22.33 (0.18%)
NASDAQ 2,805.28, -13.03 (0.46%)
S&P 500 1,318.43, -7.62 (0.57%)
NYSE Composite 7,883.90, -30.91 (0.39%)
NASDAQ Volume 2,061,939,750
NYSE Volume 4,521,722,000
Combined NYSE & NASDAQ Advance - Decline: 2651-2944
Combined NYSE & NASDAQ New highs - New lows: 332-21 (very extreme)
WTI crude oil: 99.70, +0.30
Gold: 1,726.70, +26.60
Silver: 33.74, +0.62

Wednesday, January 25, 2012

Fed to Keep Rates Low Through Late 2014; Most Investors Pleased

Ending the first FOMC rate policy meeting of 2012 with a bang, the Federal Reserve announced today no change in their target federal funds rate of 0-0.25%, but the major announcement was that they would keep this same, historically-low rate in effect through "late 2014." The rapid results of the Fed's announcement that they would keep monetary policy ridiculously easy for the next three years were felt immediately in all markets.

The dollar dropped like a rock against most other currencies, especially the Euro.

Bond yields fall dramatically.

Stocks turned from mildly negative to ferociously positive.

Gold, silver, crude oil and most other commodities spiked higher.

Those were the winners. The losers were just about anybody on a fixed income, which includes not only those on Social Security or retirement pensions, but also most workers in the private sector, which has experienced flat to lower labor prices for most of the past decade.

Therein lies the fallacy of the Fed's dual mandate of providing stable prices and full employment. Obviously, on both measures, the Fed has failed badly over recent years and is now in a no-win situation without much flexibility to react to real-time events and unforeseen circumstances.

With yields on money market funds and certificates of deposit at or near record lows, the Fed is encouraging risk, though Americans, still saddled with too much household debt, many with underwater mortgages to go along with stagnant wages, still aren't fully in the mood - nor do many have the wherewithal - to spend freely and get the economy out of the dolorous regime of 1-3% growth.

Business, generally, though there are pockets of severe conditions, are content to keep grinding on, though innovation and new enterprise creation has been somewhat stifled, though not to the degree it has been, especially during the forlorn days of late 2008 and early 2009.

Conditions are generally much better than back then, as major banks have largely re-capitalized, households have paid down a good portion of debt and governments - outside of the petulant federal one - have tightened budgets though labor reductions, better spending discipline and capital controls. The final pieces to the puzzle of a sustained, vibrant recovery rest squarely upon the shoulders of the federal government, which must seriously tackle the issues of Fannie Mae and Freddie Mac, reducing the annual deficit (a balanced budget, or something close to it, would be a welcome change), restructuring the tax code, reducing needless regulations and implementing fundamental changes in entitlement programs.

The federal government's list of dirty laundry is long and unlikely to be resolved to any great extent in the background of a presidential election year. That is not the Fed's problem, just as the profligate spending of many of the European nations should not be an epidemic for the ECB, though that is exactly what it has become.

The Fed is doing just about everything it can to make the business environment friendly and accommodative while the federal government, though gridlock and ideological differences, fights, kicking and screaming at any and every notion of change.

Americans, on the other hand, are ready for change in a more positive direction, a theme repeatedly stressed in Tuesday night's State of the Union address by President Obama, who outlined a number of measures to get government working for the people again at the federal level, such notions quickly dismissed by political commentators and opponent Republicans as mere politicking.

Sadly, the politics of Washington, DC will not allow for any substantive changes for at least another year, meaning that Americans are stuck with what they've been handed, like it or not, making the matter of improving one's economic conditions a paramount requirement for each individual and family.

How, though can individuals help the economy grow?

Perhaps through being wiser shoppers, better disciplined managers of their own finances and smarter stewards of their own assets, which is not limited to just stocks, bonds, retirement accounts and real estate, but must include a dedication to some basic American principles, such as working hard, saving (though that is tough, but necessary), and making progress and innovation in one's chosen career path.

Working Americans, must shoulder much of the burden, as usual, though the lot of most working Americans (the 80-90% of the labor force with jobs) isn't really all that bad presently, it's the future - along with the repayment of past debts - about which most are overly concerned.

Considering that the worst of the recession is well behind us by now and that the Fed has signaled that conditions are unlikely to change much in the coming three years, the real issue is that of confidence, in one's job, one's future and in America.

It is up to everyone to see to it that the federal government is brought into line with the wishes of the middle class. It's not enough to deride the rich for not paying their fair share of taxes. More emphasis must be placed upon the well-entrenched welfare state. The poor aren't pulling their weight very well, either.

It's not enough to vote for the candidates of choice in November. It is the duty of all Americans to inquire and to become informed about government policies, resist them if necessary, protest them if they are wrong and change them if possible.

The Federal Reserve or the federal government will not make the needed changes to bring America back to a system of individual rights and fairness without hearing from each of us, all of us. It is long past time for Americans to take matters into their own hands, deal with the vagueries and inconsistencies of institutions and turn the tide. We are at an important point of change in our history and individuals must make the difference.

Dow 12,758.85, +83.10 (0.66%)
NASDAQ 2,818.31, +31.67 (1.14%)
S&P 500 1,326.06, +11.41 (0.87%)
NYSE Composite 7,914.81, +74.16 (0.95%)
NASDAQ Volume 1,954,827,375
NYSE Volume 4,410,711,500
Combined NYSE & NASDAQ Advance - Decline: 4049-1578
Combined NYSE & NASDAQ New highs - New lows: 239-20
WTI crude oil: 99.40, +0.45
Gold: 1,710.90, +46.40
Silver: 33.28, +1.30

Tuesday, January 24, 2012

Stocks lower as Europe Weighs Heavily on Risk Assets

Stocks simply stalled out today as the euphoria over a new year continued to wear thin and the realities of Europe took center place in the minds of investors, traders, cheaters, liars and assorted money moguls.

Ancillary to the dilemma on the Continent, US companies are weighing the potentialities of a pan-European recession, which the IMF clearly defined today in cutting their global growth estimate from 4% to 3.25% for 2012. In case anyone's interested, that 0.75% cut in growth amounts to a drop off of 18.75% in their estimate. Whether the IMF economists just throw darts at a wall in search of a politically correct "number" or actually have ferreted out the world's economy to the penny, the sense of this announcement is pretty clear. Europe is big enough to plunge the rest of the world into a prolonged recession or, at best, a slow growth regime for the next four to five years, which, on top of the past three years of uncertainty, confusion and doubt, doesn't bode well for the rest of 2012 and beyond.

The IMF also lowered their forecast for the 17 nations comprising the Eurozone, from 1.1% growth in September to -0.5% today. In ordinary terms, the IMF is calling for a mild recession in Europe, though anyone who's been following this tableau of financial terror, knows that a mere 0.5% falloff would be a rather welcome outcome.

The Peterson Institute for International Economics (PIIE) has released their January 2012 Policy Brief[PDF]. The 13-page report, authored by Peter Boone and Simon Johnson details most of the pressing issues facing Europe and the viability of the EU itself.

The authors cite five key measures towards the survivability of the Eurozone:
Five measures are needed to enable the euro area to survive: (1) an immediate program to deal with excessive sovereign debt, (2) far more aggressive plans to reduce budget deficits and make peripheral nations hypercompetitive” in the near future, (3) supportive monetary policy from the ECB, (4) the introduction of mechanisms that credibly achieve long-term fiscal sustainability, and (5) institutional change that reduces the scope for excessive leverage and consequent instability in the financial sector.

Let's dissect these five measures one by one.

1) an immediate program to deal with excessive sovereign debt. Like what, actually paying down debt rather than continually issuing more bonds to avoid reality?

2) far more aggressive plans to reduce budget deficits and make peripheral nations hypercompetitive” in the near future. What would Greece and Italy do to become "hypercompetitive?" Eat faster? Dance more wildly? This is ludicrous.

3) supportive monetary policy from the ECB. Somehow, that just doesn't exactly jibe with "excessive sovereign debt" outlined in #1.

4) the introduction of mechanisms that credibly achieve long-term fiscal sustainability. Can you say "gold standard" and "kill the Euro" in the same sentence?

5) institutional change that reduces the scope for excessive leverage and consequent instability in the financial sector. Banks, governments acting rationally? The authors have clearly headed into an alternate dimension.

The off-the-cuff remarks notwithstanding, Johnson and Boone come to the startling conclusion that Europe's problems are not going to be fixed either easily nor soon, saying, in their conclusion, "Europe’s economy remains, therefore, in a dangerous state."

Well, somebody tell the stock jocks that their portfolios are about to shrink.

Elsewhere, Greece talks to get private investors on board for a voluntary "haircut" have stalled out once again, as there continues to be no deal on restructuring Greece's largely unpayable debt, while on Wall Street volume dried up completely in advance of tomorrow's FOMC non-eventful rate policy announcement and subsequent (ZZZZZZZZZZZZ) press conference.

Yes, it was another bang-up session for US equities. Now might be a good time to escape, like the hordes of other individual investors already have, having absolutely no confidence in markets, the government, or the sustainability of our glorious "recovery."

After the bell, the legacy of Steve Jobs lived on just a little longer as Apple (AAPL) delivered bang-up 4th quarter results, while Yahoo (YHOO) missed revenue and earnings estimates for the umpteenth consecutive time. It's very telling that Yahoo hasn't been acquired by now. Apparently, any interested buyers are content to wait until it simply disappears from the internet.

Dow 12,675.75, -33.07 (0.26%)
NASDAQ 2,786.64, +2.47 (0.09%)
S&P 500 1,314.65, -1.35 (0.10%)
NYSE Composite 7,840.65, -14.87 (0.19%)
NASDAQ Volume 1,659,757,875
NYSE Volume 3,671,223,750
Combined NYSE & NASDAQ Advance - Decline: 3138-2409 (lots of UNCH today)
Combined NYSE & NASDAQ New highs - New lows: 141-24
WTI crude oil: 98.95, -0.63
Gold: 1,664.50, -13.80
Silver: 31.98, -0.30

Monday, January 23, 2012

Markets Take Pause, But, If Everything Is so Swell, Why are Gold and Silver Soaring?

While it was somewhat expected for stocks to take Monday off after the successful ramp-up of the past four weeks leading directly into options expiry on Friday, what is more befuddling to anyone with at least half a brain (and all of our readers have fully-engaged complete brains, we are quite sure) is the stratospheric rise in the precious metals, gold and silver, since the end of last year.

In the case of gold, which plummeted to its lowest level since July 7, 2011, precisely on the last trading day of the year, December 29, at 1531.00, the close today at 1,678.30 in New York represents a move of 8.8% to the upside in 2012, easily outpacing the much-ballyhooed gains in the stock market over the same span.

Silver's move from 26.16 on December 29 to its close today of 32.27 is an even bigger move of 18.9% if one was able - or willing - to catch the falling knife precisely at its bottom.

Conventional thinking on precious metals and their relationship to stocks and currencies is rather straightforward. If risk assets, such as stocks are rising, gold and silver, the safe havens, should be lower or, at best, flat, and a strengthening currency would also serve to flatten the price of the metals.

However, the dollar was particularly strong over the first part of the new year, rising, according to the Dollar Index (^DXY) from 79.61 to 81.52 on January 13 before taking a dive back to its close today at 79.70, coming up relatively flat itself in the new year.

A theory on the price and manipulation of gold may be useful in understanding why gold has been so strong. First, the price collapse in the latter half of 2011 may have been a coordinated attempt by the fiat-crazed central banks to make gold look more like a risk asset than a safe haven, as it's gain for the year was a paltry 9.35% (from 1400 to 1531). The same scenario could be applied to the less-liquid silver market.

Understandably, not everyone ascribes to the manipulation theories, so the moves lower at the end of 2011 could have just been year-end selling or profit-taking. Whatever the case, the sellers in late December are now kicking themselves in January.

This does not explain why stocks and precious metals are rising at the same time, though it might be a bit of front-running in the metals as opposed to a pure hope and hype new year rally which Wall Street seems to find irresistible (as in, they do it almost every year). With January options expiration behind us, it will be interesting to keep track of these various price levels (dollar index, S&P, Dow, NASDAQ) going forward.

With Wall Street off to a flying start of the new year, even in the face of sub-par GDP growth worldwide in 2012, one may be suspect of this most recent slow-motion rally in stocks, yet hopeful that the precious metals would continue their decade-long bull run. Just today, Christine Lagarde, head of the IMF, politicked for a larger European bailout fund of up to $1 trillion, and mentioned that the IMF would be lowering its global GDP forecast, due out tomorrow, though she would not be specific on the size or scope of the reduction.

In New York, stocks vacillated across the flat line, ending with a split decision and overall flat close. The FOMC of the Fed begins a two-day rate policy meeting tomorrow, with the usually-suspect Wall Street crowd hoping for some signal on a renewal of QE, as a means by which to boost their bottom lines, risk free, though an outright commitment by the Fed at this time is unlikely. There would need to be more signs of sluggishness in the economy, which, after the past four weeks of stocks rallying and fairly benign economic data, have yet to surface.

Dow 12,708.82, -11.66 (0.09%)
NASDAQ 2,784.17, -2.53 (0.09%)
S&P 500 1,316.00, +0.62 (0.05%)
NYSE Composite 7,855.52, +26.19 (0.33%)
NASDAQ Volume 1,689,429,500
NYSE Volume 3,744,960,500
Combined NYSE & NASDAQ Advance - Decline: 2898-2637
Combined NYSE & NASDAQ New highs - New lows: 203-11 (yes, this is extreme)
WTI crude oil: 99.58, +1.25
Gold: 1,678.30, + 14.30
Silver: 32.27, +0.60

Friday, January 20, 2012

Nice Day for Dow Industrials, Thanks to IBM; Housing Fix Not In

Stocks continued their happy saunter through the cold of January, with the Dow Jones Industrials posting another nearly-100-point gain, thanks in large part to IBM (up 7.98 to 188.50 (+4.42%) on solid 4th quarter earnings reported after the bell Thursday), which accounted for half of the Dow's gain all by itself.

The other indices lagged far behind the Blue Chips, courtesy of Google's (GOOG) worst earnings miss in six years, reporting a profit of $2.7 billion on revenue of $10.6 billion, well below Wall Street non-GAAP estimates of $9.50 per share versus an estimate of $10.46. Whoops! Shares of the internet behemoth were down 53.58 points, a loss of better-than eight percent.

Two other tech titans - Microsoft (MSFT) and Intel (INTC) - reported excellent quarters, helping to keep the montl-long rally going. The Dow, S&P and NYSE Composite were up each of the four trading days this week; the NASDAQ fell just short, losing 1.63, despite a valiant, last-half-hour rally.

Despite the outstanding gains from the last half of December through today, there are signs of trouble, and the fact that today marked options expiry, may lead to declines next week as more companies report. With just about 20% of the S&P 500 having reported, only 55% have beaten expectations, a ten year low. The average for the past ten years has been that 62% of companies beat street estimates. Considering that the big banks have all reported already - and all of them matched or beat - this does not bode well for the bulk of reporting companies which are set to report over the next two weeks.

Meanwhile, the Dow is back at levels last seen in mid-July, today's close just missing (four points) making a six-month high. It will be interesting to see if the Dow can crack through next week and continue onward toward exceeding the 2011 high of 12810.54 made on April 29. Yes, it's getting a bit frothy. The word for next week is likely to be "overbought," as in "we're market pumping day-traders who don't give a hoot about fundamentals, just making a profit."

So far, the advance-decline and new highs-new lows indicators are showing no sign of an impending correction, but, with the Dow up nearly 1000 points in just the past four weeks, a short correction would be something a healthy market would fully appreciate.

One other item that may be a canary in the coal mine is the nice rise in gold over the past few weeks, including a healthy advance today, and, finally, silver caught a bid over the past few sessions, finally breaking and holding over the artificial resistance at $30/ounce.

On CNBC today, the network featured a series of reports on housing, calling it, somewhat inappropriately, "The Big Fix." Hottest among the topics was the government plan to sell off Fannie Mae and Freddie Mac's inventory of foreclosed homes (REO) to investor groups which will turn these single-family homes scattered across the country into rental units.

As is usual with government's half-baked plans, there are a rash of questions and arguments against, primarily centered around the whole fairness issue of kicking families out and then reselling - at what should be huge discounts - to well-heeled investors more concerned with turning profits than restoring blighted neighborhoods. The plan is still in the formative stages, but there are indications that the government will allow the investors to rent to whomsoever they please, which would include welfare and other social program recipients, meaning that homeowners ought to be on guard for the ghetto-ization and balkanization of their McMansion neighborhoods, such as is the case in other socialized nations, notably France, where the ghettos are in the suburbs, far from the uber-rich in the well-maintained cites.

One other problem is that the banks - if they actually do the right thing and write down these loans - will be facing far larger write-downs on bulk sales than anticipated. Since the US economy has been predicated for the past six years on keeping the banks free from losses, the government plan looks like a classic election-year crash and burn before it even gets going.

Dow 12,720.48, +96.50 (0.76%)
NASDAQ 2,786.70, -1.63 (0.06%)
S&P 500 1,315.38, +0.88 (0.07%)
NYSE Compos 7,829.34, +9.97 (0.13%)
NASDAQ Volume 1,979,837,250
NYSE Volume 3,911,913,250
Combined NYSE & NASDAQ Advance - Decline: 3289-2274
Combined NYSE & NASDAQ New highs - New lows: 182-26
WTI crude oil: 98.46, -1.93
Gold: 1,664.00, +9.50
Silver: 31.68, +1.17

Thursday, January 19, 2012

Amazing Stock Market Rally Rolls Along

One of the oldest adages of stock market investing is the time-honored, "the markets can remain irrational longer than you can remain solvent," or something to that effect.

This is particularly poignant in the midst of the current Wall Street "melt-up" which has been ongoing since the middle of December and shows little sign of letting up.

While corporate earnings continue to flow, the latest being from two big banks, Morgan Stanley (MS) and Bank of America (BAC), both of which met or exceeded expectations, though the accounting tricks and tactics employed by the mega-banks leave much to the imagination.

As far as Bank of America is concerned, their beat of expectations of 13 cents per share with a reported 15 cents included a bunch of one-time items and useful reserve and loan loss calculations, embedded deep within their monstrous 110-page quarterly report. Despite the discrepancies in the quarterly, Bank of America bounced higher again today, closing at 6.95, a 15 cent gain, after popping above $7 per share for the first time since Warren Buffett invested $5 billion in the bank in early 2011.

Morgan Stanley actually lost money for the quarter, but lost quite a bit less than expected. The firm’s net loss was $250 million, or 15 cents a share, compared with profit of $836 million, or 41 cents, a year earlier. The consensus expectation was for a loss of 57 cents per share. Traders took the data in stride, boosting the stock to its highest level since October. In this case, even P.T. Barnum would be proud, noting that "there's a sucker born every minute." All the better for momentum chasers in this beat-up financial.

There was a dose of economic data that surprised some and annoyed others, notably bearish investors. Initial unemployment claims came in at a sparkling 352,000 - the lowest number in months - after last week's upwardly revised 402,000. The unemployment figures continue to be a topic of some debate, in that the "seasonally-adjusted" model used by the BLS seems to have forgotten that December was holiday season, chock full of part time and temporary hires. Whatever the case, traders seemed less-than-satisfied with the numbers, as the markets began slowly but ground slowly higher through the session.

December CPI came in flat, after yesterday's -0.1% drop in the PPI, sparking fears of "disinflation" (a Federal reserve governor term) or deflation, the bogey man that haunts Fed chairman Ben Benanke.

Housing starts and building permits were flat to lower, though new home builders have been leading this rally, up more than 10% as a group since the first of the year.

How much longer can the rally last? Tomorrow being options expiration, one would think a major sell-off is in the cards for either Friday afternoon or Monday, though, as stated at the top of this piece, rationality is generally not a hallmark of recent rallies.

If you've not already taken part in this wild market ride, it may be a little late. Stocks are getting extremely overbought, as the advance-decline and new highs vs. new lows figures have been telegraphing lately.

Adding to the upside has been the unusually quiet tones coming out of Europe, as opposed to the rather hysterical daily dispatches that typified the latter half of 2011. Nothing's really changed over there, except perception, perhaps. Europe is mostly headed for a recession, which will hit the middle classes, though Greece, in particular, in already in the throes of a fiscal straightjacket which some might say is emulating a full-blown depression. To the Greeks, most of europe is saying "pay up," to which the Greeks respond with "shut up" or some other suitable and more demonstrable phraseology.

The long and short of it, if one is of the camp that believes a strong stock market is a proxy for a strong general economy, 2012 is shaping up to be a banner year or at least a good effort at kicking the can of economic woes down the road until after the elections in November.

Throwing a bit of cold water on the rally parade, as expected, Eastman Kodak (EK) filed for bankruptcy protection today, and Republican presidential nominee hopeful Mitt Romney has been found to have a number of accounts and holdings in off-shore banks, notably in the Cayman Islands, setting the stage - if he's the nominee - for a battle of ideologies between him as the ultimate one percenter and President Obama as the champion of the 99%.

While that may make for great TV, it's hardly honest, as President O'banker is about as 1% elitist as one can get without actually admitting to it.

Dow 12,625.19, +46.24 (0.37%)
NASDAQ 2,788.33, +18.62 (0.67%)
S&P 500 1,314.50, +6.46 (0.49%)
NYSE Composite 7,819.36, +52.41 (0.67%)
NASDAQ Volume 1,974,862,250
NYSE Volume 4,442,754,500
Combined NYSE & NASDAQ Advance - Decline: 3454-2119
Combined NYSE & NASDAQ New highs - New lows: 261-26 (yes, 10-1 is a bit extreme)
WTI crude oil: 100.39, -0.20
Gold: 1,654.50, -5.40
Silver: 30.51, -0.03

Wednesday, January 18, 2012

Non-stop Rally Continues As Financials Lead

Editor's Note: Apologies for the brevity and lateness of today's missive. Technical issues required a call to the hated internet service provider, Time Warner, whose tech specialists could not solve the problem, though after an hour on the phone with said tech specialists, intrepid publisher, Fearless Rick, solved the problems all by himself, proving there's something to be said for resourcefulness and self-sufficiency.

Either there's something in the drinking water at the lower end of Manhattan or, from what the stock markets are telling us, there's no reason not to be fully invested in US stocks, as they continue to rise virtually every day since the last weeks of December.

Putting aside the issues of Greece and the rest of Europe, the fact that most of the largest US banks were insolvent just a few years ago and probably still are today, the huge number of unemployed persons in the US, the 84% disapproval rating of the US congress and various other issues, US stocks apparently look like the buys of the century to the people buying them.

Consider that beginning with December 19, 2011, the Dow Jones Industrials, in the span of 19 trading sessions, has risen an incredible 812 points, or, an average of nearly 43 points per session. In the same period, the S&P has added 102 points while the NASDAQ popped for 246 points, a gain of about 9%, which would be a great return for an ordinary year, but an absolutely insane rise in the span of just one month.

What strikes one as odd is that these outsize gains began on the Monday following options expiration in December, just as we approach January options expiration. While it might be simply serendipitous, the flow of money into options has been outstanding over the past few months, and that fact alone might help explain at least a portion of the insane gains of the past four weeks.

It could also be that Wall Street traders aren't overly concerned about the issues outlined above, or are at least somewhat oblivious to them. Then again, most of ordinary Americans hold stocks in mutual funds or retirement plans, so, to them, the stock market is more spectator sport than participant-guided.

Could it be that fears of the imminent demise of the Euro are overblown, or is Wall Street purposely blowing smoke up the collective behinds of the American public?

Whatever the case, some small fortunes - and perhaps a couple of big ones - have been made in just the past month. Carry on, because the next thing you'll know is that the unemployment rate will drop like a rock off a bridge, Iran will suddenly give up on its plans to develop a nuclear arsenal and unicorns will spit gold nuggets.

Dow 12,578.95, +96.88 (0.78%)
NASDAQ 2,769.71, +41.63 (1.53%)
S&P 500 1,308.04, +14.37 (1.11%)
NYSE Composite 7,766.95, +96.48 (1.26%)
NASDAQ Volume 2,035,416,625
NYSE Volume 4,096,162,500
Combined NYSE & NASDAQ Advance - Decline: 4400-1251
Combined NYSE & NASDAQ New highs - New lows: 207-31
WTI crude oil: 100.59, -0.12
Gold: 1,659.90, +4.30
Silver: 30.54, +0.41

Tuesday, January 17, 2012

New Year Rally Continues, But Financial Stocks Fade

Another three-day weekend has passed, another European crisis barely averted and, lo and behold, another Tuesday rally fueled by speculation in pre-market futures. To say that US markets - and, by inference, global markets - are being propped up on false hope and denial of reality would be a gross understatement.

A little history suffices to show that last year, January was a positive one for the markets, with the S&P 500 gaining 29 points, pointing the way toward - according to the mighty January Barometer - a solid year, and we all know how that turned out, with the market's absolute top occurring in late April.

This is a replay of just about the same scenario with one big difference. Stocks are probably a little better than fairly valued, but corporate profits are not expected to set new records (after 2011's record earnings). Rather, competition and currency exchange concerns will likely limit what most of the big, multinational firms will make in 2012, to say nothing of the impending default of Greece and the recent downgrading of about half of the nations comprising the Eurozone.

Here in the US, focus will be on the presidential race, which looks exceedingly like it will come down to a very disturbing and divisive fight between the incumbent Democrat, Barack Obama and the Republican Mitt Romney, who looks quite a bit like what "occupy" movement supporters deride as a fat-cat, political and capitalist sociopath.

In essence and for the practical purposes of governing, Romney's not much different from Obama, leaving Americans with the usual unpalatable choice of the lesser of two evils. The press, for the fourth presidential election in a row, will hail this as "the most important election of your life," which, of course, it certainly is not, though the amount of money pumped into the campaigns by super-PACs will be the stuff of legend.

With any luck, the preponderance of political advertising will result in more Americans revisiting old habits and older friends, and tuning out the mainstream propaganda machine full time.

As for this current vapor-rally on minimal volume (a tell-tale sign of weakness), it may just come to an abrupt end with the expiration of options on Friday, or, being that the powers behind the Ponzi fiat money scheme need to keep up appearances, it could just saunter along for a few more months. Since the Republicans in congress wish to unseat Mr. Obama at almost all costs, expect gridlock in Washington for the rest of 2012, though geo-political events (think Europe, Iran and the Middle East) could certainly send stocks spiraling lower, just as they did in late 2007 and through much of 2008.

Some interesting macro-economic facts came to light over the Martin Luther King holiday weekend, such as ratings agency Standard & Poor's commencing to downgrade the EU's main liquidity funding mechanism, the ESFS, a notch, from AAA to AA+, putting even more stress on the Continent's debt issues.

As mentioned Friday, talks about restructuring private Greek debt have fallen apart and an outright default before March 20 appears to be all but certain.

Back in the US, the average age of vehicles on the road has reached a new high of 10.8 years as strapped consumers delay the purchase of new cars indefinitely. So much for the government's bailout of GM and Chrysler. Shares of General Motors are up about four points this year, reaching 24.20 as of today, but are still well below the IPO price of $35 per share.

Two of the nation's largest banks issued 4th quarter earnings reports prior to the opening bell. Wells-Fargo (WFC), now the largest bank in the US by market cap, met expectations, but Citigroup missed badly, with reported earnings of 38 cents a share, missing rosy estimates of 51 cents per share and well below last year's fourth quarter of 43 cents. Shares of Citigroup were bashed, losing 2.53, to 28.22, a loss of more than eight percent.

Today's market was punctuated within the first 20 minutes of trading, hitting the highs for the day, with the Dow up 161 points before the day-long selling commenced. Optimistic gapped-up opens followed by floundering into a weak close is a sure sign of an over-hyped market, though the Dow has sported gains in six of ten sessions this year.

Bull markets don't last forever, especially secular bulls, such as this one, which has persisted since the bottom in March of 2009. The mini corrections in the Spring and again in August haven't dampened investor sentiment much, though weak volume remains a persistent feature. Eventually, reality, such as Citi's poor showing today, will take hold of even the most stubborn bulls... and their money.

Dow 12,482.07, +60.01 (0.48%)
NASDAQ 2,728.08, +17.41 (0.64%)
S&P 500 1,293.67, +4.58 (0.36%)
NYSE Composite 7,670.47, +38.44 (0.50%)
NASDAQ Volume 1,819,276,375
NYSE Volume 3,883,768,500
Combined NYSE & NASDAQ Advance - Decline: 3262-2341
Combined NYSE & NASDAQ New highs - New lows: 217-46
WTI crude oil: 100.71, +2.01
Gold: 1,655.60, +24.80
Silver: 30.14, +0.61

Friday, January 13, 2012

Friday the 13th Unlucky for JP Morgan, Europe Sovereigns as Debt Ratings Are Slashed

Friday the 13th was unlucky for most investors as stocks slipped over concerns of "imminent" credit downgrades in Europe and JP Morgan Chase's (JPM) quarterly results disappointed on revenue.

JP Morgan released 4th quarter and annual results prior to the opening bell sending related financial stocks into a tailspin.

JPM's earnings excluding items met expectations of 90 cents per share, a decrease from $1.12 per share in the year-earlier period, but full-year net income was $19 billion, down from $26.72 billion a year ago and well below analyst expectations of $23 billion. Quarterly net income was $3.72billion, down from $4.83 billion a year earlier.

JP Morgan was down 93 cents at the close, to 35.92, a loss of 2.52%.

It wasn't long after trading commenced in New York that news began leaking out, via Reuters, that many European nation's credit ratings were about to be downgraded by Standard & Poor's, which had put all 17 Eurozone nations on credit watch negative on December 5th.

The persistent rumors haunted european bourses, which fell dramatically on the news. Finally, after US markets closed in advance of a three-day weekend, S&P confirmed, dropping the credit ratings of nine countries, leaving only Germany with the gold-standard, AAA rating.

The following list, courtesy of London's daily Telegraph details the action:

France CUT one notch to AA+
Austria CUT one notch to AA+
Italy CUT two notches to BBB+
Spain CUT two notches to A
Portugal CUT two notches to BB (junk)
Belgium AFFIRMED at AA (the country was cut in November)
Malta CUT one notch to A-
Cyprus CUT one notch to BB+ (junk)
Luxembourg AFFIRMED at AAA
Slovenia CUT one notch to A+
Slovakia CUT one notch to A
Ireland AFFIRMED at BBB+
The Netherlands AFFIRMED at AAA
Estonia AFFIRMED at AA-

All outlooks remain negative, except for Germany and Slovakia.

US stocks were crushed in the early going, but rallied throughout the afternoon, limiting losses. The Dow Jones Industrials were off by as much as 160 points in early going.

The Euro fell to its lowest level in 16 months vs. the US Dollar, at $1.2667, which is actually good news for European exporters and generally bad for US companies doing business in Europe.

Volume in US markets was weak (same old story) as participation levels have fallen off dramatically since the 08-09 financial crisis, many individual investors pulling money out of equities via funds and/or personal accounts. The low trading levels is somewhat of a bell-weather for the economy, mirror low participation rates in the labor force as Americans seek alternatives to both investment and traditional working roles.

The losses today pretty much cut the week's gains for the major indices in half. Stocks have been grinding higher through the first two weeks of the year, but there seems to be little conviction from traders.

Next week will be chock-full of earnings reports, many of which will meet or beat expectations, though the number of pre-announcements has been running unusually high for the 4th quarter and investors are nervous, as action in the financials and JP Morgan, in particular, made quite clear.

Also, Greek talks with creditors have broken down, leaving open the possibility that the proposed 50% voluntary haircuts on Greek debt would become involuntary, triggering credit default swaps payouts as early as March, when Greece is scheduled to receive another round of funding from the IMF and ECB.

Dow 12,422.06, -48.96 (0.39%)
NASDAQ 2,710.67, -14.03 (0.51%)
S&P 500 1,289.09, -6.41 (0.49%)
NYSE Composite 7,632.03, -49.23 (0.64%)
NASDAQ Volume 1,686,001,750
NYSE Volume 3,692,377,750
Combined NYSE & NASDAQ Advance - Decline: 1874-3682
Combined NYSE & NASDAQ New highs - New lows: 142-50
WTI crude oil: 98.70, -0.40
Gold: 1,630.80, -16.90
Silver: 29.52, -0.60

Thursday, January 12, 2012

Stocks Continue Relentless March Higher Despite Poor Economic Data

Once again, US equities finished the day on an upbeat tone, though data hardly suggests that the economy is either robust or growing rapidly. In fact, two releases prior to the market open were depressing enough to send stocks to morning lows out of the open.

Retail Sales for December were nothing short of a disaster, rising a mere 0.1% on expectations of a 0.4% boost, putting an end to the fiction that was widely spouted around financial circles, that holiday sales were brisk and consumers had their wallets wide open during the festive season.

Ex-autos, retail sales were even worse, down 0.2% (maybe those annoying Lexus Christmas commercials were good for something after all) on epectations of a 0.3% gain.

Business inventories were tighter, growing at a modest 0.3% in December after being up 0.8% in November. The drawdown during Christmas season will have consequences, especially involving calculations of 4th quarter 2011 GDP, and, if it continues, 1st quarter 2012 figures as well.

Perhaps the scariest number of the morning came from the wholly-discredited BLS, with their weekly report on initial unemployment claims, which came in much higher than the expected 375,000, bumping up to 399,000, which no doubt will be revised upward above 400,000 next week. From the data, it certainly seems to make sense that the BLS numbers are not properly seasonally-adjusted, and that many of those holiday season jobs were just that, seasonal, as in not permanent.

The uptake on the data is that American retailers are in deep trouble, consumers aren't about to rush out and buy just because they have a few extra dollars in their wallets or purses, and good, well-paying jobs are still on the horizon of imagination.

All of those assumptions did not deter Wall Street from boosting stock prices for the fifth time in eight trading sessions this new year. The reason would most likely be in the belief that Europe's debt crisis is all but solved, following an ECB announcement of no movement in interest rates and better-than-expected results in Spanish and Italian bond auctions. As usual, traders will hang their collective hats on any data that supports the cause of endless money printing and higher and higher stock prices, in the belief that a strong stock market is a good reflection of the overall economic picture, which is pure folly.

Large bankruptcies are on the rise, indicating a resumption of the financial fallout from 2008. With Kodak already on the ropes and possibly days away from a formal bankruptcy announcement, Hostess, the maker of Twinkies, Ding-Dongs and other high fructose snacks, filed bankruptcy on Wednesday.

The next victim is likely to be Sears Holdings. Lender CIT, the firm now headed by the nefarious John Thain, has made it clear that vendors to Sears and K-Mart will no longer receive financing or payment guarantees. Thain, who was the last CEO of Merrill Lynch before it was forced upon Bank of America, was one of the leading banking figures responsible for much of the 2008 financial crash.

Apparently, Thain has found new life as a vulture, now circling the bond holdings and other assets of Sears.

On the real estate front, all the buzz is over the government plan - first suggested by the Federal Reserve, which is holding reams and reams of near-worthless RMBS - to turn Fannie Mae and Freddie Mac foreclosures into rental properties. The two failed GSEs became the lenders of last resort and have back-handedly bailed out the nation's biggest banks by buying back much of the worthless mortgages still sitting somewhere off the books of JP Morgan Chase, Bank of America, Citigroup and Wells-Fargo.

Many of the same firms who caused the financial and mortgage miasma in the first place are now lining up to buy the foreclosed properties at rock-bottom prices and turn America into a nation of renters. Deustche Bank, Fortress Capital, Barclays Capital, Neuberger Berman Group, Ranieri Partners and UBS are among firms interested in becoming property owners and managers. Good luck with that. Like all other attempts to inject new life into the failed housing market this program will be the subject of great scrutiny and consternation from American citizens, many of whom were forced out of their homes during the late 2000s.

Naturally, these vulture capitalists will get to cherry pick the foreclosures, largely at the expense of the US taxpayer. Outrage should begin forming from groups like the Occupy movement and others within weeks. The government will likely present the program as a jobs-building incentive when in reality it is nothing less than a well-conceived plan to fleece Americans as renters since virtually nobody can qualify for a mortgage these days.

Dow 12,471.02, +21.57 (0.17%)
NASDAQ 2,724.70, +13.94 (0.51%)
S&P 500 1,295.50, +3.02 (0.23%)
NYSE Composite 7,681.26, +19.28 (0.25%)
NASDAQ Volume 1,662,562,500
NYSE Volume 3,939,928,500
Combined NYSE & NASDAQ Advance - Decline: 3397-2175
Combined NYSE & NASDAQ New highs - New lows: 166-40
WTI crude oil: 99.10, -1.77
Gold: 1,647.70, +8.10
Silver: 30.12, +0.23

Wednesday, January 11, 2012

No News, No Earnings, No Data, No Volume Means Nothing Much for Stocks

The Wall Street HTF machines must have been cranked up to maximum momentum on yet another day without any notable news or data, because stocks, after an early dive into the red, continued an inexorable advance throughout the session, pushing all major indices to positive or flat closes.

Despite Alcoa (AA) announcing in-line earnings on Monday, there haven't been any companies of import releasing full year and 4th quarter results this week. That should all change next week when the market will be inundated with quarterly and year-end reports from a plethora of firms, but so far this week, the markets have had little to move on in either direction.

Instead of pouring into or out of positions, as is often the case in the first few weeks of a new year, traders have been stuck in neutral the past five sessions, and the rest of the week doesn't offer much in the way of market-moving events or news.

The fed released its beige book, detailing what everybody already knows: that the US economy is limping along, unemployment remains a stubborn problem, housing is still weak and December retail was something of a non-event. Even word from the almighty Federal Reserve did nothing to move stocks.

Down 63 points shortly after 10:00 am ET, the Dow finally pushed into positive territory in the final 20 minutes of trading before falling back to red at the close. Leading the slow surge, the NASDAQ had been positive most of the session, with the S&P following the Dow's path, finally finishing with a fractional gain.

One notable item not mentioned around the trading posts was the upcoming debacle of another debt ceiling increase, just five months after the congress and president Obama wrangled over raising the ceiling last August. Our brilliant leaders have managed to blow through some $900 billion in fresh debt since then and will need another rise, which was negotiated in the initial bill.

President Obama is set to ask congress for another $1.2 to $1.5 trillion in a matter of days. The congress will have 15 days to decide whether to grant Mr. Obama his wish. Meanwhile, the debt ceiling will be once again breached, and, after appropriate dummy theater, the congress will oblige. The rhetoric should be especially thick this time around, especially with debate on whether to keep the inappropriately-named payroll tax decrease for the remainder of the year. That deal runs out at the end of February.

Political junkies will enjoy the show; the rest of us will entertain emotions from boredom to disgust. Thank God for the NFL playoffs.

Dow 12,449.45, -13.02 (0.10%)
NASDAQ 2,710.76, +8.26 (0.31%)
S&P 500 1,292.48, +0.40 (0.03%)
NYSE Composite 7,662.17, -6.73 (0.09%)
NASDAQ Volume 1,712,712,875
NYSE Volume 3,965,303,250
Combined NYSE & NASDAQ Advance - Decline: 3208-2391
Combined NYSE & NASDAQ New highs - New lows: 112-36
WTI crude oil: 101.73, -0.51
Gold: 1,639.60, +8.10
Silver: 29.89, +0.08

Tuesday, January 10, 2012

Markets Are Just BLAH


That's the one word that describes this market and generally the state of US equity markets for the past month.

Yesterday was the low volume day for the new year. Today wasn't much better.

Today, stocks shot up at the open, reached the highs of the day early on and drifted in a narrow range for the remainder of the session. That's it. Nothing happened that would affect markets in either direction. The Ponzi scheme of the banks, the Fed and the government is working to perfection. Stocks will slowly move higher until there's some need to liquidate (like options expiration next week).

Otherwise, shut up and spend, peons. Everything you need will get more expensive while your wages stagnate or get cut, unless you work for the government or collect a welfare, disability or SS check.

45 million on food stamps. No growth. No incentive to start new businesses. Overregulation. The American Dream died somewhere between 9/11 and the mortgage meltdown which began in 2007. Get ready for a long, slow, painful decade of dashed hopes and failed families.

(I wish I could be more optimistic, but it's simply not possible.)

Mitt Romney or Barack Obama? Does it really matter? Both are tools of the banking elite as are most of your senators and representatives in the House.

Not only is the economy crumbling, so is the whole country, from the infrastructure to the societal norms to civil liberties, which have been dashed and pounded into dust the past 11 years.

Just BLAH. And, BAH!

Dow 12,462.47, +69.78 (0.56%)
NASDAQ 2,702.50, +25.94 (0.97%)
S&P 500 1,292.08, +11.38 (0.89%)
NYSE Composite 7,668.90, +84.24 (1.11%)
NASDAQ Volume 1,815,157,750
NYSE Volume 4,201,000,500
Combined NYSE & NASDAQ Advance - Decline: 4221-1407
Combined NYSE & NASDAQ New highs - New lows: 252-42
WTI crude oil: 102.24, +0.93
Gold: 1,631.50, +23.40
Silver: 29.82, +1.03

Monday, January 9, 2012

Euro a Bit Higher; Stocks Barely Respond as Sinking Feeling Persists

After the first week of trading turned out to be one big cork pop on January 3rd - when the Dow soared 180 points, mostly at the open - and a slow melt lower, the first Monday of the new year was more evidence of just how sick, tired and moribund global markets have become. It's as though everybody is just waiting for the other shoe to drop, that some seismic implosion - most likely in Europe - is about to send stocks into a prolonged tailspin that ends in repudiation of sovereign debt and another huge blow to the fiat-based banking system.

Evidence exists that all is not well in Euroland, while pundits here in America point to the only positive metric they can see, higher corporate profits, though even there, signs are beginning to emerge that the record profits from 2011 are as fleeting as the passage of a few moments in time.

Estimates for 4th quarter corporate earnings have been slashed, and the number of pre-announcements from companies is at a three-year high, harkening back to the dismal days of early 2009, when there was nothing anybody or any company could do to halt the continuing downturn.

Even today's rather slow-moving market was full of tepid trading, highlighted by fractional moves in the averages, suggesting that nothing short of a complete overhaul of Europe's finances - and maybe even our own - can provide the kind of stimulus needed to restore investor confidence, which has waned severely since the middle of last year.

Even the bold joint pronouncement today by France's Nicolas Sarkozy and Germany's Angela Merkel failed to inspire any confidence. The two leaders set a timetable of March 1 for Euro-zone leaders to detail a plan of stricter budgetary restraint among member nations. Of course, critics and skeptics claim to have heard that song before. In the original agreement, a nation's current deficit was not supposed to exceed 3%. Any claims that sovereign states will clean up their balance sheets and act responsibly is met with jeers and, soon, tears.

America met a seminal moment in its own history today, as the nation's debt equalled its GDP, putting the world's powerhouse economy on a level approaching that of Italy, Greece or Portugal.

For its part, the White House appears ready to jettison all the bad residential loans held at Fannie Mae and Freddie Mac by turning them over to investors in bulk, with an eye toward turning over two million foreclosed and now-delinquent homes into rental properties, overseen by a hand-picked, large, well-capitalized property management firms.

The plan was first introduced by the Federal Reserve last week, though our friend Jim Willie, aka, the Golden Jackass, has been predicting such a move for the past two years, with deleterious effects abundant. The problems, from even a casual point of view, range from traditional homeowners being shut out of owning affordable housing and being forced to rent at increasingly-expensive rates, to the potential of default on property taxes should one of these "well-financed" firms going bust. It's almost the sub-prime crisis in reverse and is a radical departure from the American dream of home-ownership.

The property managers will likely receive sweet-heart deals from the government, slashing the prices to be paid on the homes instead of offering principal write-downs to strapped homeowners or new, qualified applicants because banks have been steadfastly denying mortgages and credit to even the most risk averse individuals and families.

We are quickly heading into a bleak, black hole of socialism, wherein the next shoe to drop won't be a ballet slipper but rather the boot of the storm trooper landing squarely on the necks of millions of tax-and-debt slaves, while the rich get bailouts and the poor get handouts.

Fairness is a word that seems to have permanently departed the American scene. Economic ugliness and despair approaches at breakneck speed all in the name of keeping up appearances.

After the closing bell, Alcoa (AA) kicked off earnings season with a disappointing, yet fitting, loss of three cents per share.

Dow 12,392.69, +32.77 (0.27%)
NASDAQ 2,676.56, +2.34 (0.09%)
S&P 500 1,280.70, +2.89 (0.23%)
NYSE Composite 7,583.76, +26.08 (0.35%)
NASDAQ Volume 1,777,449,250
NYSE Volume 3,248,196,250
Combined NYSE & NASDAQ Advance - Decline: 3385-2189
Combined NYSE & NASDAQ New highs - New lows: 170-62
WTI crude oil: 101.31, -0.25
Gold: 1,608.10, -8.70
Silver: 28.78, +0.10

Estate Litigation Requires Competent, Trustworthy Lawyers

Dealing with windfalls, such as an inheritance, can be a time-consuming, albeit eventually rewarding experience, if one is willing to make the effort to investigate the details of an estate and seek out professional counsel to handle the intricate and sometimes thorny parts of the various statutes of estate law.

Laws covering estates generally fall under the laws of individual states or, in Canada, specific provinces, but all estate law is bound in principal by federal statues and subject to tax, though, like the federal income tax, there are wide swathes of exclusions, exemptions and deductions which allow rightful heirs to keep much of what is being passed on from a decedent.

The most arduous part of the process is called probate, wherein a court will examine the will, determine the heirs and the executor (if named in the will, otherwise one will be appointed by the court or chosen by the heirs), set up a tax account and begin the process of separating out assets and liabilities.

The two most important individuals involved in the handling of an estate are the executor and the estate lawyer, and it's of paramount importance that the executor locate and retain a qualified specialist, preferably in the geographical location of the deceased, because, generally, that's where most of the assets will be located.

It's not a difficult task to find qualified estate attorneys in one's particular city of town, thanks to the internet. For instance, somebody looking for a lawyer in Barrie, Ontario, would simply enter search terms on Bing or Google for estate lawyer barrie to return a list of qualified practitioners of estate litigation and then proceed to contact the best and/or most reputable.

Both the executor and the attorney are limited to the amount they can receive from handling an estate. Usually, the amount is a percentage of net assets, somewhere in the range of three to six percent. This generally-universal feature of estate law provides a safeguard to rightful heirs that an unscrupulous executor or attorney (yes, there are a few) cannot appropriate the best or most valuable assets of an estate, be they in the form of real estate, securities, goods or cash in bank accounts.

Dealing with the death of a loved one is an emotional issue for many, but keeping in close contact with the executor over the period of the "estate year" (generally the amount of time it takes to settle and discharge a will and estate) is a good idea for heirs who believe they are entitled to a share of the disbursement.

Friday, January 6, 2012

Stocks Finish First Week of 2012 in Mixed Fashion, Though Higher for Week

Yesterday, a commenter on a popular blog site made the bold statement that we may have already seen the highs for the year - meaning 2012, just three trading days into the new year.

While this prognosis has already been proven wrong vis-a-vis the NASDAQ, which was the only major US index to finish with a gain today, he may actually have a point.

Holiday sales figures continue to trickle in, and, as expected, the optimistic gains predicted by the National Federation of Retailers (talk about having an agenda!) have been somewhat diminished. The International Council of Shopping Centers reported that November-December sales were up just 3.3%, as opposed to last year's 3.8% gain and less than the NFR's rosy 4.5% prediction.

While companies such as Limited Brands, Macy's and Nordstrom showed solid gains over last year, their revenue figures may have exacted a serious toll on their profit margins and earnings. Target, Kohl's, Best Buy and J.C. Penney have already slashed their 4th quarter estimates, citing warmer-than-usual weather and a tough economy (duh!) as the main factors contributing to a slowdown in holiday sales.

Wal-Mart, the nation's largest retailer by number of stores and gross sales volume does not report figures on a month-by-month basis, but was expected to have had a good, though not stellar, holiday sales season.

Bloomingdale's and Macy's have already announced planned store closures as America's appetite for non-stop spending on non-essentials seems to have fallen victim to real economic pain.

Today's release of the BLS' December non-farm payroll data put credence to the idea that Thursday's ADP announcement of 325,000 net new private sector jobs in the month was - as usual - coming from a separate reality, as the Labor Department reported 200,000 (a nice round number) new American jobs in December.

However, a number of analysts - notably those from Morgan Stanley - contend that the BLS figures, which are supposedly seasonally-adjusted, may not, in fact, have been adequately adjusted, citing the huge gains in transportation, particularly in the subset of couriers and messengers (+42,000), and retail (+28,000). Also, the construction industry gains of 20,000 were due to mild weather across most of the country, so the real figure, which will be eventually revised lower, though probably not down to its actual level, is likely somewhere in the neighborhood of 120,000.

Wall Street certainly wasn't buying any of it, as Thursday was mostly flat after the ADP report and Friday was a loser overall. Traders - those few remaining in the worst trading market in years - seemed more concerned about the weakening Euro and the prospects of an EU breakup prompted by any of a number of characters, from Greece to Italy, Spain, Hungary or Portugal.

So, could 2012 be a real downer for stocks? It's probably too early to tell, though there are signs from europe that nothing is fixed, which is similar to what happened in the US in the aftermath of the 2008 financial crisis. The banks were bailed out and business went on for many, almost as usual. The core issues plaguing both the US and Europe are still government-related. Huge bureaucracies spend too much money they don't have, tax rates can't get any higher and unfunded liabilities - primarily pensions and health care - continue to contribute to a growing mountain of debt.

It is too soon to tell, for sure, but no catalyst for positive gains is present or on the horizon. Earnings reports will start to trickle in beginning Monday and will become a deluge by mid-month, and that will provide some direction. Corporate profits have been solid, but 4th quarter results will be a key element moving forward.

There's a sense that solid 4th quarter results have already been priced in and any misses or near-misses will be dealt with severely. The remainder of January and early February may be a period in which companies are punished even for just meeting expectations as investors may view this time as the end of a virtuous profit cycle.

And, of course, there's always Iran, and China, and the ongoing continental problems in the European Union. Any gains will be indeed climbing a wall of real worry.

The first week of 2012 was positive, but marginally so. The Dow Industrials sported a gain of just 142 points, the S&P 500 was up 20 points, the NASDAQ gained 69 points and the NYSE Composite added 80. Volume remained at disinterested levels.

Dow 12,359.92, -55.78 (0.45%)
NASDAQ 2,674.22, +4.36 (0.16%)
S&P 500 1,277.81, -3.25 (0.25%)
NYSE Composite 7,557.68, -42.29 (0.56%)
NASDAQ Volume 1,706,200,875
NYSE Volume 3,544,665,750
Combined NYSE & NASDAQ Advance - Decline: 2524-3040
Combined NYSE & NASDAQ New highs - New lows: 138-47
WTI crude oil: 101.56, -0.25
Gold: 1,616.80, -3.30
Silver: 28.68, -0.61

Thursday, January 5, 2012

Correlation Trades Correlating, Kind of; Jobs Data Up Next

Remember those correlation trades that were discussed at length yesterday and how they weren't exactly correlating?

Well, today, they worked a little better, though they are still skewed against their traditional trading bias.

The Euro was flattened today, hitting a new 12-month low against the US Dollar, and, for a while, that seemed to be working as US stocks were down heavily in morning trading, but, as soon as Europe's equity markets closed at 11:30 am ET, stocks began drifting upwards, and the momentum stocks on the NASDAQ actually finished with healthy gains while the S&P and Dow (which had been down as much as 134 points earlier) finished basically flat.

With the Euro hitting below 1.28 to the dollar, the Dollar Index responded with a one percent gain (80.949, +0.818), reaching a one-year high. That sent oil prices lower, as it should, despite the continuing wagging of tongues by both the Iranians and the leaders of the EU. While the EU's move to embargo all shipments of oil from Iran to Europe, is a bit of a dodgy move (Iran's exports to Europe only account for 20% of their oil exports), so too is Iran's statement that they can and will shut down the shipping lanes through the Strait of Hormuz.

It looks like the classic Mexican standoff, with the US pointing its guns directly at the Iranians. The Europeans will likely go through with their threatened sanctions, but the Iranians will probably not want to evoke the ire of the United States, because that would produce something along the lines of World War III, even though that may be what Iran wants and the rest of the (un)civilized world needs.

Europe's woes continue non-stop, with the ultimate Ponzi scheme of the banks buying sovereign debt, and the ECB financing the banks. It's the most disingenuous way of dealing with a solvency crisis - by adding layers and layers of liquidity - and it eventually will either spark runaway inflation, riots, government overthrow or the breakup of the European Union, and it's possible that all of the above could occur.

As for gold and silver, they were back in tandem, though with the higher dollar, they both should have been lower, instead of up, which they were, supposedly on global tensions and safe-haven status.

The other news of the day involved US employment figures from ADP, which reported a gain of 325,000 private sector jobs in the US, seasonally adjusted. The number was so large, and so far removed from official predictions (guesses), that traders generally ignored them, opting to wait for the equally-well-massaged non-farm payroll report from the BLS tomorrow.

That report, which will be issued at 8:30 am ET, should be a market mover, especially if it aligns well with the ADP number, but skeptics abound, and the estimates are for the US to have added somewhere between 120-175,000 new jobs, which would indicate exactly what? The BLS numbers are guestimates at best, but traders will likely take their cue from whatever blather comes from the Labor Department.

Stay tuned. It's going to get more bizarre as the year progresses.

Dow 12,415.70, -2.72 (0.02%)
NASDAQ 2,669.86, +21.50 (0.81%)
S&P 500 1,281.06, +3.76 (0.29%)
NYSE Composite 7,599.97, -12.18 (0.16%)
NASDAQ Volume 1,859,210,875
NYSE Volume 4,264,649,000
Combined NYSE & NASDAQ Advance - Decline: 3391-2193
Combined NYSE & NASDAQ New highs - New lows: 140-37
WTI crude oil: 101.81, -1.41
Gold: 1,620.10, +7.40
Silver: 29.30, +0.20

Wednesday, January 4, 2012

Correlation Trades Breaking Down: Decoupling, Distress or Distribution?; Kodak Prepares for Bankruptcy

There have been, for many months, certainties in global markets from which investors and speculators could readily rely upon and profit from. The most obvious of these is the straightforward relationship of the Euro and US stocks.

Whenever the Euro was positive against the US Dollar, stocks would post gains as well. Euro down, stocks down. A simple trade for those speculators adroit enough to move money quickly in and out of currencies and stocks. It also created a very nice hedge for monied investors with a keen sense for geo-politics and the movement of money.

Another of these correlation trades has been in effect for years, even decades. when the Dollar Index (^DXY) moved higher, the price of a barrel of oil would go lower, since oil and almost all other major commodities are priced in dollars. A stronger dollar would thus buy more oil, or wheat, or soybeans, for instance.

Today, however, these two stalwarts of the inner, holistic trade deviated from their seemingly-predetermined paths. The Euro was off sharply, but stocks finished with modest gains or were flat, nonetheless. And the Dollar Index was up nicely, (80.097 +0.434 0.54%), but oil marched higher despite the obvious overpricing and general lack of demand over the past two weeks.

The oil moves could be partially blamed on the Iranians and Europeans. Europe has set the parameters for a complete embargo of Iranian oil. For its part, Iran says it doesn't need to sell oil to europe as it has many other trading partners, China being the largest. The Iranians also say they can effectively shut down shipments of oil from other countries by blocking the Strait of Hormuz, disrupting the free flow of energy from the region to Western nations.

While that's all well and not-so-good, it still doesn't explain the dislocation of the Dollars-for-oil trade and is entirely based upon speculation.

As for the Euro and US stocks, it wasn't a large move away from the direct correlation, but notable. Then there's silver and gold, the two precious metals that should always move in tandem, as they have for maybe thousands of years. Gold was up, silver down on the day, making silver, already a cheap cousin, even cheaper and wildly undervalued compared to gold, where the standard gold-silver ratio has traditionally been somewhere between 12:1 and 16:1, now stands at a stunning 55:1. It has been higher over recent years as gold shot up much faster than silver, but, if global tensions are accelerating, both metals should become good bets short term, though it stands to reason that silver would appreciate at a much faster rate, as it did in the first four months of 2011.

All of that implies that both the gold and silver (and not to mention stocks, commodities and currencies) markets aren't rigged, a condition that reams of evidence over many years say is so.

OK, then what's up with these markets if correlation trades, usually among the most reliable and steady, continue to break down? Is it decoupling for Europe, global distress or some technical distribution which the markets haven't anticipated from a zero interest rate policy and massive money printing (in shady but effective forms) by central banks around the globe? If oil goes up as the Dollar Index improves, so will stocks, and the precious metals will do whatever the manipulators deem necessary. It's not yet a trend, but bears watching, because decoupling often is a harbinger of even more fractured conditions in markets, which would make perfect sense in this mad world.

Something else bearing watching is the anticipated disappearance of the Kodak moment. The film maker has been on the ropes for years as the company failed to develop a strategy shifting from film cameras to digital photography, and the stock has suffered badly, losing almost all value over the past decade. A Wall Street Journal report today that the company was preparing to file a chapter 11 bankruptcy either this month or by early February should they not find buyers for their digital patents - valued, dubiously, at over $1 billion - sent shares plummeting.

Shares of Eastman Kodak (EK) finished the day down 0.18, to 0.47, a 28% decline. The company has also received a delisting notice from the NYSE, as the price of the stock has traded below $1 for more than a month, in violation of exchange rules.

That the company would eventually commit corporate hari-kari should come as no surprise. The stock traded as high as the low 80s in the late 1990s, and dropped permanently below 60 when the dotcom boom went bust in 2000-2001. Since then, the losses have mounted and the share price decline has been precipitous. This is a dead company without a product or strategy, which has wiped out its dividend, shareholders, and soon, pensioners, sure to be shuffled off to the Pension Benefit Guaranty Corporation, another backhanded bailout by the US taxpayer.

Dow 12,418.42, +21.04 (0.17%)
NASDAQ 2,648.36, -0.36 (0.01%)
S&P 500 1,277.30, +0.24 (0.02%)
NYSE Composite 7,612.15, -12.17 (0.16%)
NASDAQ Volume 1,654,986,250
NYSE Volume 3,553,585,250
Combined NYSE & NASDAQ Advance - Decline: 2475-3130
Combined NYSE & NASDAQ New highs - New lows: 102-34
WTI crude oil: 103.22, +0.26
Gold: 1,612.70, +12.20
Silver: 29.10, -0.48

Tuesday, January 3, 2012

New Year, Same Dull Market Rally

How an a rally be dull?

When it's a staged annual event designed only to enhance confidence in the markets, lasts only one day and the bulk of the gains occur in the first fifteen minutes of trading, that qualifies as dull and that's what we had today.

Last year, stocks showed the same kind of activity on the first trading day of the new year. Did it help? Maybe, for the first four months, but markets topped out in late April and ended the year nearly flat and about 5-7% below the 2011 highs.

Today's opening bell ramp job also featured low volume, now a trademark of a market where individual investors are uncomfortable and have been pulling out money since the 2008 collapse, but especially since the flash crash of 2010.

The reasons for today's jump at the open were rather obvious. europe didn't implode over the holidays and the Euro was up against the US Dollar. That's all the traders and fund and portfolio managers needed to know to give the thumbs up for a "risk on" session as has been the pattern for the past 18-24 months.

Tomorrow or next week or next month, there will be more volatility from a failing Euro, a political flap or shoddy earnings reports and this rally will be forgotten, as all others have been. It's just the "new normal" of a market dominated by a few, well-heeled, major players.

Just as last week was dull for the absence of volume and price swings, this week promises a new kind of dullness, as stocks rally for no good reasons other than everybody wants to feel good about stocks.

Besides, the real money today was made in oil futures - up 4.18% thanks to Iran's sabre-rattling - and silver - up 5.94%.

Dow 12,397.38, +179.82 (1.47%)
NASDAQ 2,648.72, +43.57 (1.67%)
S&P 500 1,277.06, +19.46 (1.55%)
NYSE Composite 7,624.33, +147.30 (1.97%)
NASDAQ Volume 1,656,354,375
NYSE Volume 3,901,734,250
Combined NYSE & NASDAQ Advance - Decline: 4326-1409
Combined NYSE & NASDAQ New highs - New lows: 277-35
WTI crude oil: 102.96, +4.13
Gold: 1,600.50, +33.70
Silver: 29.57, +1.66