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

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