Wednesday, November 26, 2008

Markets Continue Recovery

With only a half-session scheduled for Friday, investors took note of some economic news that was not all bad for a change and threw some more money at stocks on Wednesday, in anticipation of better days ahead.

By the time the session had ended, all major indices were sporting healthy gains, with the Dow and S&P 500 up for the fourth straight session, the first time that had happened on the S&P - since May.

Investors were a little less hesitant after yesterday's consumer confidence numbers turned up better than expected - at 44.9 after October's dismal 38.1 reading. Of course, this was the first survey taken since the election, and probably was influenced by a preponderance of opinion that we were about to replace one of America's worst presidents with one who could not possibly do any worse. Naturally, some were of the opinion that Mr. Obama would be a far better president than Mr. Bush, whose policies have turned out to be verifiable disasters.

On top of that, the most recent new filings for unemployment were down from the previous week, though still abnormally high, at 529,000 for the week ended 11/22. That was about it for positive news. The rest of the day's data was pretty dour, but expected to be so.

While personal income rose 0.3% in October, personal spending was down a full 1%. What's this? Americans earning more and spending less, resulting in net saving? Frugality seems to be back in style. On that fashion note, however, comes the caveat that saving money instead of spending it is bad for business. It's effects on the economy at-large, in the longer term, though, are positive. More money in savings means there's just more money around. Economists and business school graduates call it pent-up demand, but what do they really know?

To the casual observer, the events of the past 3-12 months may have looked rather normal. To economists and stock market gurus, they were anything but. The near-collapse of the worldwide banking system, replete with governments throwing wads of cash at the $8-14 trillion problem caused by subprime loans, was more like a revisit from the ghosts of 1929, when the market actually did crash and a worldwide economic depression ensued. The actions by central banks and treasuries around the globe may have prevented nothing more than a serious recession. We are, nonetheless, now saddled with all the trappings of government bailouts, fixes, patches, interest rate game and assorted nonsense because GDP is sliding instead of advancing.

On the surface, modern economics is ludicrous. If there is ever a hint of stability - that the normal swings of the supply-demand dynamic seem to be headed for a perfectly-natural downturn - our leaders rush around making dubious fixes in the middle of the night and over weekends, shoring up those stalwart idiots who run banks, insurance companies and other financial, non-work companies. We will be paying for the excessive under-and-over-regulation and care for generations, but, worry not, today will be fine and the holiday season will be full of mirth, merriment and plenty of credit card charges.

So, our GDP decreases by 2%, if that, and the leaders of the world act like the whole shooting match is about to go down in flames. Idiots, every one of them.

The continued not-so-bad news delivered to Wall Street included a pair of business surveys and both the Chicago PMI and the Michigan consumer sentiment data were lower. The PMI fell to 33.8, from 37.8, which the consumer sentiment index dropped to 55.3, from 57.9. Not everyone is convinced, it seems.

The general feeling is that while we will soon be turning a corner when Mr. Obama and the Democrats take control of the White House and both chambers of congress come January 20, we are not quite there yet. There's still Christmas and the doleful doubts that will be raised by slow spending at retailers. If that is all we have to worry about - that Nordstrom's sales are off 12%, or that J.C. Penny sells a little less than last year - we've really got little reason to be concerned. The average working stiff will still be getting a paycheck at regular intervals and the government will still confiscate a large portion of that pay. Life will proceed with little change for the majority of folks. Those at the very top of the income and wealth scale have already taken huge losses, but those can be recouped. It's not like any billionaires are starving. We shall all be fine, just fine, when the next boom begins and the wizards of Wall Street can go about finding ways to muck it all up again.

Dow 8,726.61, +247.14
NASDAQ 1,532.10, +67.37
S&P 500 887.68, +30.29
NYSE Composite 5,547.38, +172.02

For the day, advancing issues beat decliners by a wide margin, 5373-1176. New lows continued to dominate new highs, 220-24, though the number of new lows has diminished greatly over the past week. Volume was relatively relaxed, though stable.

NYSE Volume 1,423,623,000
NASDAQ Volume 2,003,840,000

All of this good, or not-so-bad news was reflected in commodity pricing, which is bad for the consumer overall. A lid should be put on commodities so that inflation does not creep back into the picture. The last thing we need is companies boosting their prices. They are just fine were they are, and could even fall a bit more without everyone not wanting to bail out miners, oil riggers and cattlemen. Some price deflation would be welcome relief, as we've all seen with gasoline prices. A reduction in the size of winter heating bills would free up more money for real, discretionary purposes.

But the commodity markets didn't see it that way on Wednesday, as oil gained $3.93, to close at $54.70. The metal were more restrained, with gold losing $6.20, to $8.14, and silver up just 4 cents, to $10.34. Precious metals investors have been the least damaged by recent market turmoil. Gold is only down some 20%, though silver is off by 50%. The yellow metal should decline back into the $630-690 area early next year as the prospects for catastrophe diminish.

As John McLaughlin might say, gobble, gobble. Enjoy the holiday.

Tuesday, November 25, 2008

Quiet Day Welcome on Wall Street

On Tuesday, stocks took a bit of a breather from their wild zig-zagging, with the major indices ending with the smallest point changes in weeks.

Dow 8,479.47 +36.08; NASDAQ 1,464.73 -7.29; S&P 500 857.39 +5.58; NYSE Composite 5,375.36 +61.60

While the NASDAQ ended the session on the downside, the other indices were all on the uptick as the government announced a massive plan to boost consumer spending and credit.

The $800 billion plan, approved by Fed head Ben Bernank and eannounced today by outgoing (and not a moment too soon) Treasury Secretary Hank Paulson, targets buyouts of debt-backed securities, specifically, $200 billion for credit card backed securities and $600 billion to buy up mortgage-backed securities held by Fannie Mae and Freddie Mac along with mortgages issued by those firms.

Sounds like more of the same kind of nonsense that got us into the mess in the first place. The government is simply churning all kinds of money through major institutions while the people who are doing the real suffering, the American taxpayer, are getting nothing in return. $800 billion is indeed a tidy sum. It amounts to more than $2500 for every US citizen. It still seems that simply doling out that kind of cash directly to individuals and families would make a whole lot more sense and actually get the economy moving in a big way forward.

However, we have numbskulls continuing to run the USA into the ground in their final two months in office. Bush and Paulson have practically bankrupted the entire nation in just the past two years. They obviously are not through spending money that won't likely be repaid for a generation, if at all.

On the day, advancing issues outperformed decliners, 4102-2450. There were 305 new lows and 13 new highs. Volume was moderate, slightly to the heavy side.

NYSE Volume 1,871,699,000
NASDAQ Volume 2,440,636,000

Oil gained 15 cents, to $50.92. Gold fell $2.20, to $818.30. Silver lost a penny to $10.30.

The government also reported that the third quarter was poorer in performance than their earlier estimate, revising their GDP estimate from a -0.3 to -0.5.

Wednesday marks the last full day of trading for November. With the Thanksgiving holiday Thursday, a half-session is planned for Friday.

Monday, November 24, 2008

Citigroup Bailout Boosts Stocks

For the second consecutive session, stocks rallied as the federal government made steps toward stabilizing the fragile US economy. On Friday, it was the leaked announcement of Timothy Geithner to head up President-elect Obama's Treasury Department that caused a late-day rally. Monday's moves were attributed to Obama's transition team making Geithner and other appointments official, plus word that beleaguered Citigroup would receive additional financing to help weather the economic storm from bad loans and equally bad quarterly reports.

The bank has shown substantial losses in each of the last four quarters as its stock price sank below $5 per share, a point at which many institutions could not - under their charters - continue to be holders of the security. Shares of Citigroup (C) closed 57% to the good, at 5.95, still far below their value of just months ago.

Dow 8,443.39 +396.97 (4.93%); NASDAQ 1,472.02 +87.67; S&P 500 851.81 +51.78 (6.47%); NYSE Composite 5,313.76 +353.97 (7.14%)

Market internals continued their alignment to headline numbers. Advancing issues overwhelmed decliners, 5472-1213. There was also a major drawdown in the number of new lows, which had reached historic proportions last week. While there were just 5 recorded new highs, the number of new lows shank considerably from Thursday and Friday's figures, down to 418, as compared to the more than 2000 new lows on Friday. Volume was on the high side, another positive development.

NYSE Volume 2,034,090,000
NASDAQ Volume 2,590,952,000

Commodities staged a rally all their own. Crude oil jumped $4.14 to $54.07. Gold added $29.00, to $821.40, marking the first time gold has been over $800 in a number of weeks. Silver gained by more than 10%, up $1.00, to finish at $10.51 per ounce.

While these numbers in commodities and the general stock market all look good today and are signs of confidence in the new administration, there are still rough patches through which the US economy must travel. Though the days of bank bailouts may be behind us for now, there still are underlying issues in mainstream companies, notably, lower earnings and coming layoffs. These are bound to follow on shortly and carry through into the first quarter of 2009.

Friday, November 21, 2008

Geithner Appointment Boosts Stocks in Final Hour

I used to call this kind of activity "proof" of the existence of the PPT (Plunge Protection Team), though such wild trading swings have become so commonplace that one has to question exactly what is going on.

There seems to be such a high level of concentrated insider trading on Wall Street that major moves - both up and down - have to be viewed with a large dose of skepticism.

Surely, stocks are down in a major way from a year ago, but the evidence that there is a global recession in progress has yet to manifest itself in major ways. Maybe that is only my perception, and to a large degree it must be, though there are some indications that the economic downturn is still affecting only peripherally.

Most people still have jobs and are not in any immediate jeopardy of losing them. Gas prices are much lower than just months ago, and half what they were a year ago. The only visible signs of any crisis are evident only on Wall Street and in Washington, D.C. The tail is wagging the dog.

Today's final hour boost was credited to a news leak of President-Elect Barack Obama's imminent appointment of Timothy Geithner as Treasury Secretary. Anonymous sources were credited by various news outlets, also mentioning that Lawrence Summers would become a senior advisor and New Mexico Governor Bill Richardson would be appointed Commerce Secretary on Monday, November 24.

Dow 8,046.42 +494.13 (6.54%); NASDAQ 1,384.35 +68.23 (5.18%); S&P 500 800.03 +47.59 (6.32%); NYSE Composite 4,959.79 +308.58 (6.63%)

The day's trade generally vacillated along the break-even line until the 3:00 hour, and at that point began a wicked ascent which wiped away the losses incurred on Thursday on the Dow. Significant advances were made on the other major indices. Advancing issues surpassed declining ones, 4157-2514. New lows overwhelmed new highs 2575-46. Nearly 40% off all listed securities on the NASDAQ and NYSE fell to fresh lows today on significant volume.

NYSE Volume 2,372,786,000
NASDAQ Volume 3,128,916,000

Commodities all gained. Oil was higher by 51 cents, to $49.93. Gold was up a massive $43.10, to $791.80. Silver advanced 46 cents, to $9.51.

The average investor has to be confused with recent market volatility, and with good cause. It is unprecedented.

Have we seen the bottom? Who knows?

Thursday, November 20, 2008

America 40-60% Off; Detroit's Real Problem

Congressional leaders said today that there would be no bailout money for Detroit's Big Three automakers - Ford, GM and Chrysler - until the companies offer some kind of business plan outlining how they would use the money to make their businesses more competitive. Auto executives have been in Washington the past two days begging for $25 billion in immediate funding.

At long last, congress has come up with an idea that makes sense: require companies to submit detailed spending plans before granting or loaning them massive amounts of money. The move, largely the idea of congressional Democrats, may be more of a stall than anything else, keeping the bailout ball in the air until President-Elect Obama and a fresh congress are put officially in charge come January. As it now stands, both houses of congress plan to go into recess for the Thanksgiving holiday this Friday and return on December 2. (Yes, congress gets a week off for Thanksgiving.)

Even if that is the case, it's certainly better than just handing over $25 billion to another bunch of whining corporate executives who are now begging the government to help them out of a tight spot. Truth is a troublesome thing, but the auto industry has been in deep trouble for years. US manufacturers kept insisting on building cars that guzzled gas, or that most Americans could not afford. Producing a low-priced economical car was never in the plans of any Detroit-based automaker as they misjudged the market completely.

The reason Ford, GM and Chrysler need cash from taxpayers is simple: American automobiles are too expensive. Everything in America is now 40-60% off or will soon be. Stocks, real estate, food, clothing, almost everything is dropping in price or soon will be forced lower for the simple reason that people will not buy because they don't have the money. Simple supply and demand economics will change life in America and deflate prices back to 1970s levels in pretty short order, maybe two to three years.

So, the dynamic for the next five years for smart entrepreneurs and business operatives should include lower production costs, fixed costs and labor costs resulting in products which will produce profit margins at lower price points. Detroit, pay attention.

In response to congress telling the auto CEOs to basically take a hike, investors panicked once again, supposedly on the belief that what the CEOs have been saying may be true, that if they didn't get their $25 billion pound of flesh from the US taxpayer immediately, that the economy would sink into a grave depression. Too bad. More people lost more money today on false assumptions. America, and Detroit, and the hundreds of thousands of auto workers will muddle through until January. Don't worry, be happy. You may be able to buy that Cadillac for about $20,000 less next year, or maybe next month.

Stocks went a long way toward finding a bottom on Thursday. In addition to the auto executives getting the stiff job by congress, unemployment figures released prior to the market open were shocking. For the week ended 11/15, there were 542,000 new unemployment claims. Nobody should be shocked, however. The truly large layoffs haven't even begun. By January, we're likely to see 650,000 new claims in a given week.

In any case, by the end of the day, the Dow took another major one-day loss. On a percentage basis, it was the smallest of the major indices.

Dow 7,553.56 -443.72 (5.27%); NASDAQ 1,316.12 -70.30 (5.07%) S&P 500 752.45 -54.13 (6.71%); NYSE Composite 4,651.26 -360.73 (7.20%)

Market internals were roughly as bad or worse than yesterday's horrific numbers. Declining issues outnumbered advancers, 5940-760. New lows reached a truly historic number of 2956 on the session. Interestingly, new highs were up again, to 47 today, from 22 yesterday. This is a phenomenon to which one should pay attention. The new highs are likely being made by companies that were battered in 2007 and are now in the process of recovery. This could provide somewhat of a clue to where stocks will find a real bottom. We're certainly getting closer to it, no matter what.

NYSE Volume 2,222,210,000
NASDAQ Volume 3,175,616,000

Volume was extremely high, indicating the level of panic in the markets. It's a shame, really. All of these people selling now could have done so months ago. Now they've lost all hope, usually a sign of a bottoming out or the bottom falling out. If it's the latter, forget 6500-7200 which I mentioned as the bottom yesterday. We'd more likely be looking at 3000.

Commodities were mixed again. Oil fell by more than 8% as slack demand continues to drive prices down. Crude for January delivery fell $4.45, to $49.65. Gold bugs see opportunity in the yellow metal, driving the price up $12.70, to $748.70 an ounce. Silver fell again, losing 29 cents to $9.05. The metals, in comparison to other commodities, are probably 20-25% overvalued still.

I leave you today with a string of two-worded advisories: Remain calm; don't panic; spend frugally; save daily; promote discounts.

Wednesday, November 19, 2008

Stocks Fall to New 5-Year Lows

The inevitable finally occurred on Wednesday as fearful investors pulled more money out of US stocks and dropped major indices to new lows.

Damage was widespread, with all sectors showing losses and the blue chip Dow Industrials recording one of its worst sessions on record, a blistering 427-point, panic-induced drubbing.

Dow 7,997.28 -427.47; NASDAQ 1,386.42 -96.85; S&P 500 806.58 -52.54; NYSE Composite 5,011.99 -353.67

While the CEOs of Detroit's Big Three automakers (Ford, GM and Chrysler) flew in private jets to Washington, where they begged for government assistance, the unheard small investor prayed silently for relief.

Huge companies may fall in this most wicked of all financial storms, but the real tragedies are being felt hardest by honest working men and women who are seeing years of painstaking investing and planning spill down a drain of deceit and despair as the value of stocks continues descending to points unknown.

The massive $6 trillion hole drilled into the world financial system by the subprime mortgage thievery - and then exacerbated by the same parties taking out insurance against the very loans they knew would fail - will not be repaired soon, if ever.

The day began with CPI figures for October showing a 1% decline in October and ended with more fear and doubt than ever in recent days. By shattering the lows set just weeks ago, on October 27, investors are awe struck by the sheer size of the continuing declines. Comparisons to the crash of 1929 are not exaggerated. Stocks have lost nearly half of their value in just one year's time. Nobody has been able to divine a way to stem the worsening economic conditions.

But it's not all bad news. Many people still have jobs, many of them well-paying ones. Unemployment has not yet reached 10%, though that is according to government figures. What the feds fail to take into account are the large sums of monies earned by labor which go routinely unaccounted for and the determination of the American people as a force for right and reason.

Out in the vast access of America are god people who will make the best of the situation. As all asset classes come tumbling down, some people, particularly those at the traditional bottom, will actually find themselves comparatively better off than before. Those who did not own stock and who have no savings will feel the least pain of all.

It's a new world, just 50-70% poorer and cheaper.

Market internals on the day were along the lines most often seen in major bear market corrections. Declining issues beat down advancers, 5958-639. New lows expanded to 1871 - nearly one out of every three stocks on the major exchanges. There were 22 stocks making new 52-week highs. Volume was high, yet another indication that the markets are again in the midst of a major sell-off.

NYSE Volume 1,546,734,000
NASDAQ Volume 2,424,409,750

The worst fears will be realized some time between now and late January. Two major events will collide on and around January 20. A newly-elected government will take the reigns of the nation and 4th quarter earnings reports will roll out from corporate offices to shareholders, investors, traders, brokers and analysts. The earnings reports are almost certain to be horrific. There's some hope that the newly-minted government will bring improvements. Nothing, however, is certain, as always.

Commodities mostly continued their downward trek. Oil dipped another 66 cents, to $54.10. Gold gained marginally, up $3.30, to $736.00. Silver fell 24 cents, to $9.31.

Tuesday, November 18, 2008

Wall Street Narrowly Avoids Flushing

At 3:30 pm, with just 30 minutes remaining in the regular session, the Dow Jones Industrial Average and the NYSE were the remaining two indices that had not succumbed to the deadly gravity gripping investors. They remained above their October 27 closing lows, while the NASDAQ and S&P 500 had already shown their cards and were trading at fresh, multi-year lows.

Moments earlier, the Dow had traded as low as 8105, well below the bottom of 8175, but in the final fifteen minutes, a spirited rally lifted all indices close to the highs of the day, delaying the inevitable flushing for at least twenty-four more hours.

Dow 8,424.75 +151.17; NASDAQ 1,483.27 +1.22; S&P 500 859.12 +8.37; NYSE Composite 5,365.66 Up 42.30

That stocks will break below the October 27 lows is not a certainty, though today's retesting was probably the most serious of recent attempts. Traders must be encouraged by the idea that the indices continue to test and rebound, even though the NASDAQ has already dipped to new downside levels.

It does seem, however, that stocks have not found their bottoms yet, considering the recent volatility and various gyrations of recent days and weeks. There has yet to be a final, crushing capitulation, nor has there been any imminent signal that investing was once again a worthwhile endeavor. Bottoms are funny things. There is nobody who can call them with any certitude, and this bottom seems to be wearing thin.

Stocks are relatively cheap, but are they cheap enough? It would seem that speculators are not quite ready to take the leap without a bungee cord of some sort (like options) to pull them out of the fire should their forays prove a bit premature.

There's also the political side of the issue to consider. While President-elect Barack Obama inspires confidence and a degree of trust that the worst is behind us, he has not spelled out specific policies, nor does anyone know how the upcoming congress is going to either comply and/or oppose any initiatives.

So, for now, we'll assume that this is not the bottom, that life will go on, and that the US will sink further into a recession through the 4th quarter and probably well into 2009.

Bottom? What bottom? Patience may be the virtue most rewarding except that of abstinence for now and possibly for months to come.

On the day, the headline numbers stood in stark contrast to the internal indicators. Declining issues far outweighed advances, 4074-2469, indicating that the late rally was nothing more than good, old-fashioned tape-painting designed to keep the wolves from the door. Significantly, new lows expanded once more, to 1248, against only 14 new highs. This market is once again approaching a capitulative stage. Investors should be ready for another hefty downdraft which could occur at any time.

Volume was about as normal as it has been in a number of weeks.

NYSE Volume 1,571,633,000
NASDAQ Volume 2,379,432,000

The most intriguing aspect of this entire financial episode continues to spring forth from the font of commodities trading, where the full impact of global slack demand can be experienced in all its splendor.

Crude oil continued to drive lower, falling another 73 cents, to $54.76. Gold lost $9.30, to $732.70, while silver bucked the trend, rising by 22 cents, to $9.55 the ounce.

With producer prices falling by their largest margin in the history of that gauge, a whipping 2.8%, according to October's Producer Price Index (PPI), released this morning.

It was the third consecutive month of decline in the PPI, a sure sign not only of recession, but a deadly draft of deflation, with no support for pricing at the producer level. The corresponding Consumer Price Index (CPI) for October is due out tomorrow at 8:30 am, and should show a similar decline. If there's any silver lining in the dark clouds overhanging Wall Street, it is that the cost of everything continues to go down, a boon to consuers, though a bane to business. Some deflation was almost certain at the end of the long credit boom, but just how much, and how far down prices will have to go before stabilizing is another unanswered question. The assumption is that there's still some room below for stocks, goods, services and all asset classes.

Monday, November 17, 2008

Stocks Continue Relentless Slide

This week begins on the same note as the previous one ended: with stocks taking big losses late in the day. All major indices are once again approaching their October 27 lows with the Dow Jones Industrials just 100 points away, the NASDAQ finishing at a new low (previously 1505.90), the S&P 500 a mere 2 points above and the broadest measure, the NYSE Composite, finishing the day just 127 points above the most-recent low.

Dow 8,273.58 -223.73; NASDAQ 1,482.05 -34.80; S&P 500 850.75 -22.54; NYSE Volume 5,507,580,000 NASDAQ Volume 1,885,847,500 NYSE Composite 5,323.36 Down 129.27

Investors were initially cheered about industrial production figures provided by the Federal Reserve, showing an increase of 1.3% in October. However, closer examination of the methodology revealed that September figures were revised lower, thus affecting the October numbers positively. The net result, according to the Fed, was a reduction of roughly 0.67% for the two months combined.

Also, the seldom-quoted Capacity Utilization figures continued to stagnate at the 76.4% level, suggesting that - for the time being - overall industry will continue to reman flat or decline.

Both the Industrial Production and Capacity Utilization data can be found here.

Those numbers caused a little bit of relief midway through the session, but Citigroup announced 53,000 layoffs, and that bit of news sent shivers through the investing community throughout the day.

Investors now find themselves in a conflicted, malignant state of waiting until a new president and congress takes over the reigns of federal governing on January 20. The current congress and lame duck president don't seem capable of making any kind of useful decisions, and the ones they have made haven't alleviated any of the stresses in the market or credit system. Even the much-ballyhooed G-20 economic summit which took place in Washington Friday and Saturday ended with only a statement of desired objectives and no immediate action.

So, stocks languish, day after dreary day. News continues to erode confidence as everything seems to be spiraling downhill without respite. The list of store closings by retailers (everybody from J.C. Penny to Pep Boys to the Gap to Lowe's) continues to expand. Some malls are concerned that following the holidays there will be an absolute glut of retail space available with nobody to fill it.

Not surprisingly, decliners beat back advancing issues by a wide margin, 4804-1832. Likewise, there were far more new lows than highs: 780-9. Volume was light.

NYSE Volume 1,311,161,000
NASDAQ Volume 1,856,252,000

Oil resumed being a bad bet, losing $2.11, to $55.49. Gold was virtually unchanged, losing 50 cents to close at $742.00. Silver dropped 16 cents to finish the day at $9.33 per ounce.

As far as the eye can see upon this somewhat murky financial horizon is nothing but trouble. Holiday sales are not expected to be merry for most retailers and job losses continue to mount in all sectors of the economy. The key questions being asked are, first, where's the bottom? and secondly, how is the economy supposed to be revived?

Obviously, nobody knows the answers, but here's a couple of guesses: The bottom will be in the 6500-7200 range, occurring either in December or early January. The revival of the economy will begin the moment George W. Bush is shown the White House exit for the final time and President Obama with a new congress can get down to work on fixing the mess with green initiatives, public works programs and sensible government solutions - something this administration seemed not only incapable of formulating, but actually went out of their ways to avoid doing.

Friday, November 14, 2008

Clearly, More Trouble Ahead for Economy

After a short-covering spree boosted stocks on Thursday, it was back to selling on Friday as news and economic reports clearly demonstrated the the US and world economy was headed for even more trouble.

Prior to the opening bell on wall Street, the Commerce Department offered a glimpse of the pain, releasing October retail sales data that showed the worst one-month decline in history, a drop of 2.8%.

On the macro-economic front, both import and export prices fell as the full wrath of deflation began to manifest themselves.

Dow 8,497.31 -337.94; NASDAQ 1,516.85 -79.85; S&P 500 873.29 -38.00; NYSE Composite 5,452.63 -263.16

As expected, there was no follow-through on yesterday's rally. Instead, investors are scrambling to get their money out of stocks as quickly as possible, even though some companies seem to be in relatively good health. Nonetheless, share prices continue to decline with no end in sight.

Internals were decidedly negative. declining issues overwhelmed advancers, 5041-1378. There were 503 new lows, but only 10 new highs. Volume was on the low side.

NYSE Volume 1,449,427,000
NASDAQ Volume 2,273,926,000

On Capitol Hill, Rep. Dennis Kucinich called the Treasury Secretary's change in the TARP bailout plan - from buying up bad mortgage debt to taking equity stakes in troubled banks - a "classic bait-and-switch." Other members of the House finance committee (of which Kucinich is the Chairman) echoed his comments and plan on further hearings on the scope and nature of the $750 billion bailout.

Fed Chairman (and full time moron) Ben Bernanke hinted that the Fed could cut interest rates once again, at the next meeting of the FOMC in December, from their current 1%. Of course, talk is now cheaper than ever in Washington, as one administration (the one which caused the problems) is on the way out the door and the Obama people are lining up for high government positions.

Bernanke's absurd concept of lowering key federal funds rates below 1% is a desperate idea designed to inject liquidity into still frozen capital markets.

That same term, "liquidity," has already been bantered about at the economic summit which kicked off today in Washington. Here we have the economic and political leaders of major nations all in one place trying to figure out how to further cripple free market economics. No doubt they will encourage more government spending and various high-sounding concepts which will do nothing except extend the now-global contraction.

Here's where we are in a nutshell: 1930. It was at this point, at the very early stages of the global Great Depression, that the government intervened in all kinds of ways. Of course, their plans did nothing. It wasn't until the mid-30s, when FDR's jobs and public works programs began to take effect, that the economy began to improve.

There's some hope that President-elect Obama and his advisors will begin to implement middle class tax cuts and public works programs that will ameliorate the condition to a degree. But, there's no question that the US and other nations are in for a long - another two to three years at least - period of economic instability in which - get this - the rich get poorer and the poor get better.

So, the dark clouds you witness hovering over the stock markets and on the news do actually have significant silver linings, if you are already poor or middle class and can manage your assets and income reasonably well. Forget stocks, forget retirement. Keep yourself liquid and on the lookout for the varied economic windfalls which will present themselves in months and years to come.

Commodities, by the way, were mixed again. Oil dipped another $1.46, to $57.60, but gold gained $37.50, to $742.50 and silver powered higher by 69 cents, to $9.49. While those gains look good today, they will likely not be sustained. All asset classes continue to decline, and the precious metals are not immune. In fact, due to various cash-for-gold schemes, there is a growing amount of gold coming into the market, and that will only serve to depress gold prices.

Just remember: everything is getting cheaper. If something you want is not selling for an acceptably low price, ask for a discount. Sellers of goods of all kinds will take less today and even less tomorrow.

Thursday, November 13, 2008

Lows Retested, Big Rally Ensues

Today was the day of reckoning, as the Dow Jones Industrial Index dropped to the 8000 level by mid-afternoon, but then rebounded strongly on a combination of speculative fervor and short-covering. Other major indices participated in a broad-based rally that lifted all by 6-7%, one of the best one-day gains of all time.

As usual, there was no real warning or news to spark off the spectacular, three-hour rally into the close. There was only the indications that stocks were once again falling to, or below, the October 27 levels, which marked multi-year lows on the Dow, NASDAQ and the S&P.

With reasons known only to the geniuses on Wall Street who brought us such fundamentally stupid ideas as subprime loans, credit default swaps, and now, government bailouts, today's big move is probably as consequential as leaves falling from trees in November, considering the day was devoid of any news which could be labeled "good."

Instead, the morning got off to a horrible start when the Labor Dept. announced a sudden jump in initial unemployment claims to 516,000 and the federal government released fiscal first quarter budget figures which showed the government already $237 billion in the red.

Dow 8,835.25 +552.59; NASDAQ 1,596.70 +97.49; S&P 500 911.29 +58.99; NYSE Composite 5,715.79 +395.09

Also weighing on investors minds was Intel's dire forecast for the 4th quarter, predicting sales lower by $1 billion for the world's largest chip maker, which was released after the market closed on Wednesday.

Those data points and earnings forecasts set a dull tone for early trading, which is why the massive rally should be seen as nothing more than a technical bounce. Lows will almost surely be retested again, as the economic conditions in the US and around the world have deteriorated beyond the point of desperation. Going forward, it's difficult to see how stocks can gain much ground through the holiday season and into the end of the year.

On the other hand, stocks are quite cheap compared to where they were just a few months ago. Google dropped below 300 for the first time since 2005 on Wednesday, but was boosted back to 310 by the close on Thursday. Many stocks are now carrying dividend returns in excess of 5 and 6% due to low share prices. It's unlikely, in an environment of such historically low interest rates, that these relative bargains will persist.

Market internals reflected the headline numbers, at least in the advance-decline line, where gainers outpaced losers by a healthy margin, 4739-1718. New lows, however, continued to grow, to 1416, as compared to a mere 13 new highs.

Volume was spectacularly high, which normally would be a strong indicator on such a huge upside session, though the clouds of short-selling and covering lay all across this maligned market.

NYSE Volume 1,991,154,000 NASDAQ Volume 3,038,288,000

Commodity prices were mixed, but probably more a consistent indicator of where things are heading than equities. Crude oil gained $2.03, to $59.06, recovering some of the huge losses of the last two weeks, though the trade may amount to nothing more than a one-day aberration. Oil has come down quite a bit, from a high of $147 in July, to current levels, which seem to be more sustainable.

Gold declined by $13.30, to $705.00, while silver priced 68 cents lower, to $8.80. One could not blame anyone for dipping a toe in the precious metals market at this point, especially silver, which is down more than 50% from recent highs.

Friday is likely to be another bummer for economic news as retail sales figures for October are released at 8:30 am. At 10:00 am, business inventory data comes out, and there is every indication that goods are beginning to collect dust on shelves not only in retail, but in heavier, commercial goods, as well.

Wednesday, November 12, 2008

Crash Part Two: Retest Lows and Go Lower

Stocks continued their decline on Wednesday, a pattern that is retracing the meteoric rise from October 27 to November 4, which saw the Dow rise by 1450 points in just six sessions. At the close today, the Dow has erased all but 107 points of that gain - all in just another six sessions.

Volatility, anyone?

What's occurring in the markets is simply the readjustment that comes after decades of credit creation and now, the resulting collapse of the economic forces that find the increased money flows to be unsustainable.

Over the past 20 years, the US, and to a larger part, the world, economy was blown out of proportion by easy money via various central banking maneuvers. Now, those same central bankers are scrambling to keep the level of money flow intact (impossible) and the conditional economies on a growth path (also impossible).

The natural development of a monetary implosion which we are now witnessing is probably something to be very afraid of, if you are on a career path, have a high-income job (or any kind of job for that matter), or have investments in stocks that were earmarked for retirement, college or some future planned event.

Your money is quickly evaporating before your eyes while central bankers continue to create money out of thin air which is also predestined to evaporate. We are now in the second phase of an historic market crash - in slow motion - where investors re-evaluate all positions and asset values continue to decline. And they will continue to decline for some time, until world governments discontinue their meddling in what used to be free markets.

If, on the other hand, you are poor, but without any severe debt or health issues, you will be comparatively better off if only because everything - from gas to clothes to cars to food to housing - will continue to become more and more affordable, assuming, of course, that your pittance of a salary or income remains the same.

Dow 8,282.66 -411.30; NASDAQ 1,499.21 -81.69; S&P 500 852.30 -46.65; NYSE Composite 5,320.70 -313.67

Call it what you will, this recession, depression, adjustment is going to last longer than anyone - including myself - had planned. Some otherwise sensible economists are calling for improvement by the second half of 2009, or, in other words, a year from now. That's being overly optimistic, in my view. The extent of the damage from fast money - both in its easy credit form and now the rapid disappearing of same - is likely to be more severe than almost anybody can imagine.

On the day, stocks were hammered across the board. Declining issues beat out advancers by the widest margin of the week (and Monday and Tuesday were fairly large gaps), 5754-735, an 8-1 ratio. New lows expanded the distance between themselves and new highs to 1120-11. All this data is telling us that the retest of the October 27 lows are on pace and continuing.

Volume increased slightly, for the second straight day, setting up for more declines on higher volume as the week winds down.

NYSE Volume 1,455,420,000
NASDAQ Volume 2,184,735,000

Commodities took another turn for the worse, as they should, keeping in line with the general theme of declining asset values. Crude oil for December delivery fell another 5%, by $3.17, to a two-year low of $56.16. Gold lost $14.50, to $718.30 and silver dropped 33 cents to $9.48.

Outgoing Treasury Secretary Paulson made some statements today which confirmed that he has had and continues to have no clue of what he is doing or has already done.

This statement, ""And to adequately reform our system, we must make sure we fully understand the nature of the problem which will not be possible until we are confident it is behind us," says it all.

That $750 billion bailout, or TARP, as those on Capitol Hill like to call it, is a complete and utter failure thus far. As many already understand, throwing more money at failing or already failed institutions or businesses just exacerbates the problem by rewarding bad behavior.

Free markets require free thinking and the freedom of markets to destroy businesses which are no longer necessary, competitive or otherwise functional. Government meddling will only make matters worse, which we're about to find out, again.

Tuesday, November 11, 2008

Race to the Bottom

Stocks continued on their inexorable grind back towards recent lows on Tuesday, sending the major indices to their fourth loss in the last five sessions. Only a mid-afternoon rally kept stocks from sinking even further.

The day didn't offer any huge surprises, just the usual assortment of downbeat economic news and jitters over the rapid decline in consumer spending. The good news - if it can be called that - is that retailers are offering unprecedented pre-holiday discounts on everything from socks to CDs following unusually soft spending in October.

Dow 8,693.96 -176.58; NASDAQ 1,580.90 -35.84; S&P 500 898.95 -20.26; NYSE Composite 5,634.37 -167.68

On the day, declining issues outpaced advancers by a widening margin, 5001-1395. New lows continued their domination over new highs, also by a growing margin, 700-15. Both of those data sets indicate that the market is still fundamentally weak and subject to further downdrafts. Without a solid bottom in place, stock could continue to languish for some time. Volume was moderate, a little better than Monday, but nothing to either dissuade or encourage investors.

NYSE Volume 1,226,731,000
NASDAQ Volume 1,935,806,000

Oil took another hit on Tuesday, losing $3.08, to $59.33. It was the first time oil has closed below $60 on the NYMerc in nearly two years. The metals followed the trend, with gold down $13.70, to $732.80, and silver losing 42 cents to $9.81. As has been mentioned numerous times here, everything is going to get cheaper. The trick, for most Americans, is to hold onto whatever job they may have and seek out bargains for essentials.

While retailers are likely to have a very poor holiday season, individuals and families, for the most part, will enjoy a somewhat sober season and gifts that won't put a dent in their budgets. Those who have ready cash should fare quite well during the downturn, with their fortunes improving the longer the slump continues.

There was some news in the banking sector as Citigroup announced a plan to keep people in their homes, canceling foreclosure plans via mortgage modifications for roughly 500,000 home owners. American Express received approval to become a commercial bank, which will allow it to tap into short-term loans (and maybe a bite or two from the bailout brunch) from the Federal Reserve.

How hard one is affected by economic conditions will vary widely by region and employment. The Northeast seems to be the least affected, as the mortgage meltdown was largely an event outside the region. People in the West, South and Midwest are going to suffer the most, as incomes stagnate, jobs disappear and the fallout from collapsing home prices brings down everything around it.

One thing is becoming more and more clear by the day. The weight of this recession is not going to end with the consumer, but with state and local governments, which are being forced into nearly illiquid circumstances as property tax bases shrink along with all other forms of revenue, especially income and sales taxes. The likelihood of mass layoffs of municipal employees becomes greater with each passing day. Widespread layoffs of public employees could, in fact, turn this recession into a long-lasting depression with unemployment hovering between 12 and 15% of the work force and continued sluggishness throughout the economy.

As the cold winds begin to blow across much of the nation, the feeling is that there's little to stop the surging wave of layoffs, spending cuts and morbid economic circumstances.

Monday, November 10, 2008

Stocks Lose Early Gains; AIG Weighs Down Market

US indices rose more than 2% in the early going, but after peaking within the first hour of trading, stocks slid downhill the remainder of the session, closing near the lows of the day.

Dow 8,870.54 -73.27; NASDAQ 1,616.74 -30.66; S&P 500 919.21 -11.78; NYSE Composite 5,802.05 -69.93

Major concern was raised when it was revealed that the US Treasury, the font from which flows all manner of goodness and capital - out of thin air - agreed to fund failed insurer AIG with another $40 billion, making the total spent on bailing out just that one company more than $150 billion. The money is coming from the omnibus package approved by congress in October which is authorized to spend up to $700 billion to aid ailing financial (and other) firms.

Also topping the news this Monday was word that Circuit City, which just last week announced the closure of more 200 stores, was filing for bankruptcy protection under chapter 11, meaning that it will reorganize while stiffing most of its creditors. Probably better that than putting the US taxpayer on the hook for a slew of unsold DVDs, digital cameras and flat-screen TVs. Maybe the Treasury can give the goods to needy families as Christmas gifts.

China announced their own version of socialized capitalism with a $586 billion bailout plan of their own. If Chinese companies can't make of go of it, who can?

All of that helped destroy what little confidence investors had left, which, not surprisingly, is very little.

Advancing issues trailed decliners by a solid margin, 4357-2002, and new lows remained better than new highs by an expanding margin, 411-12. Volume was on the low side.

NYSE Volume 1,141,823,000
NASDAQ Volume 1,717,664,000

All this should surprise nobody. As mentioned here at the end of last week, the market was poised for a nose-dive after a sharp preelection run-up and now it is merely in the rigorous process of retesting recent lows. The problem for most investors is that those lows were not friendly, nor were they indicative of any kind of bottom. With companies from diverse industries lining up for government money, the extent of this downturn could reach any kind of proportion. Or it could end tomorrow. That is the level of uncertainty faced today.

Commodities seem to have bucked their own downtrend, at least for the time being. Oil priced higher by $1.37, to $62.41. Gold gained $12.30, to $746.50, while silver added 26 cents to close at $10.22.

GM got downgraded and shipper DHL announced more than 9000 job cuts. There was even more bad news, but why belabor the point?

Friday, November 7, 2008

October Jobs -240,000; Investors Go Bargain-Hunting

The stock market is a discounting mechanism, and that was never more evident over the past three days of trading, which saw anticipation of a report citing massive job losses for October send stocks reeling on the rumors, and then rally today on the actual news.

October Nonfarm Payrolls showed a decline of 240,000 jobs for the month of October, according to Labor Department statistics. The hardest-hit segments were retailing, construction, manufacturing and consumer finance, though almost no segment was spared. Unemployment spiked to 6.5%, the highest in 14 years. Thank you, George W. Bush, and good riddance.

On the news, investors seemed more relieved than worried, and the bottom-fishing sent stocks to a solid finish for the day, though the indices finished roughly 4% lower than where they had started. Following a dismal October, November is starting off not much better.

Dow 8,943.81 +248.02; NASDAQ 1,647.40 +38.70; S&P 500 930.99 +26.11; NYSE Composite 5,871.98 +204.58

Market internals offered a solid reflection of the buoyant trade to end the week. Advancers outnumbered losers, 4166-2122. New lows beat down new highs, once again, 331-10.

Volume on Friday was the lightest of the week.

NYSE Volume 1,226,627,000
NASDAQ Volume 1,915,632,000

Commodities stabilized. Oil was up 27 cents to $61.04. Gold gained $2.00 to $734.20, while silver slipped 9 cents to $9.96. Overall, it was an historic week that ended on a bright note, despite those horrid jobless numbers.

The market will likely continue to plumb the bottom for weeks.

Thursday, November 6, 2008

Selling Continues as Investors Await Jobs Report

The post-election selling spree that began on Wednesday continued uninterrupted on Thursday, as investors took short-lived gains across the board in advance of Friday's expected blockbuster Nonfarm Payroll report, due out prior to the market open, at 8:30 am ET.

Retracing the massive gains made in the six sessions leading up to and including election day (Oct. 27 - Nov. 4), the Dow has lopped off nearly 1000 points in just the last two days as it wends it's way inexorably towards a retest of the low at 8175.

Dow 8,695.79 -443.48; NASDAQ 1,608.70 -72.94; S&P 500 904.88 -47.89; NYSE Composite 5,667.40 -344.77

Despite claims by some woefully misinformed political analysts who believe the market's performance is somehow a Wall Street referendum on the election of Barack Obama as the nation's 44th President, more astute analysis insists that investors are quickly taking profits before they are completely wiped away with the fallout from the very scary jobs report which may show US employers shedding as many as 200,000 positions in October.

Adding to the malaise on Thursday were the somewhat expected poor showing by retailers, many of which posted declines in same-store sales from the October period a year ago. That retailers would suffer in the midst of a recession is rather old news and hardly worth a check mark on the short list. The two-day pounding taken by oil prices is much more interesting and actually a bright spot for strapped consumers. More on that below.

Market internals continued to confirm the headline numbers. Advancing issues were overwhelmed again by decliners, 5133-1230. New lows expanded the gap over new highs, 357-13. Not only have new lows exceeded new highs every day except five or six for over a year now, but the number of new highs has shrunk to levels not seen in many years. It is indicative of an economic tsunami that is battering every sector and sparing all but a few stocks. Just about any individual share price is down by at least 20% from a year ago, with many off by 50-70% or more.

Volume was higher today than yesterday, indicating another flushing out of weak-kneed profit-takers.

NYSE Volume 1,525,795,000
NASDAQ Volume 2,510,131,000

As mentioned earlier, oil took another major hit, despite announced cuts by OPEC. Crude for December delivery lost $4.53, hitting $60.77, a 20-month low. Gold declined another $10.20, to $732.20, with some analysts expecting a bottom in the $650 range. It could go lower even than that. Silver fell 40 cents to $10.06, remaining the most skittish of the metals. Since silver has some industrial demand as well as intrinsic value, holders and dealers have not been quite able to grasp a price range for long. The price continues to yo-yo wildly.

Tomorrow's Nonfarms Payroll report from the Labor Department will come on top of today's revelation that the number of Americans drawing unemployment is now the highest in 25 years. Should the Dow spiral down below the 8175 mark, investors should brace for more selling in weeks and months ahead.

Despite the inordinately positive news of Obama's presidency, there are still 2 1/2 months until he officially takes the reins of power. While David Letterman and others wish he could get started sooner, the world - or what's left of it - must wait until January 20, 2009. It is upon that date and in the 30-60 days immediately following, that will determine our economic fates for years to come.

Plans are no doubt already afoot for another stimulus package aimed this time at taxpayers instead of bankers, but it will take much more than government hand-outs to repair what's broken in America's financial markets. The high of 14,250 on the Dow was just a year ago, but it seems so much further away than that now.

Wednesday, November 5, 2008

Too Far, Too Fast: Stocks Pull Back

Less than a day after Americans election their first African-American president, Barack Obama, investors took a cautious approach, taking recent profits and heading for the hills.

This day was by no means a referendum on Barack Obama. Stocks were stretched thin. As of Tuesday's close, the Dow was up a full 1450 points off the October 27 lows, just 6 short sessions ago. That's an 18% gain, hardly sustainable. A retest of the 8175 low must occur and will likely happen within the next three weeks. Stocks may actually take another hit in December, especially if retail sales slump at the start of the holiday shopping season.

Tax-related selling may also be an issue, though one cannot imagine much selling to lock in what are most assuredly losses at this juncture.

Wednesday's loss of 5.1% was the largest percentage drop on the day after a presidential election in Dow history. On Nov. 8, 1932, the day after FDR defeated Herbert Hoover for the presidency, the Dow fell 4.5%.

Dow 9,139.27 -486.01; NASDAQ 1,681.64 -98.48; S&P 500 952.77 -52.98; NYSE Composite 6,012.17 -332.92

Market internals struck a rather somber tone, with losers beating out gainers, 5037-1286. New lows were achieved by some 154 issues. Only 7 posted new highs. Volume was moderate.

NYSE Volume 5,524,001,000
NASDAQ Volume 2,201,961,000

Oil took another nose dive, losing $5.23, to $65.30. Gold lost $14.90, to $742.40, while silver gained 33 cents to $10.46.

One should refrain from reading too much into the figures over the next few days, as they are likely to be dreadful. More and more firms continue to release earnings reports and forward-looking guidance that is spooking some investors. Still others are in the process of announcing or executing job cuts. Preliminary reports say that Friday's Nonfarm Payrolls report could be a stunner, showing a massive 200,000 jobs lost in October.

Beware. We are still in a falling stock zone. 8000 could easily be shattered on the downside in coming days and weeks.

Tuesday, November 4, 2008

Good, Bad and Ugly: Stocks Soar, Oil Up 10%, McCain Thinks He's a Winner

As Americans went to the polls in record numbers on this Election Day 2008, investors on Wall Street sent the Dow Jones Industrials to a 4-week high. Who knows why? Economic news isn't that good (in fact, it's all been bad lately), corporate earnings have been spotty, Circuit City is closing 155 stores and oil popped big time on Saudi production cuts.

Today's rally is probably a canard, or, at best, an indication that big money thinks any kind of change in Washington will be a good one. The heavy money's on a big Obama win, and with that, sweeping Democrats into a very strong majority in both houses of the congress.

In any case, Wall Street seemed a different place than it had been the past two months. Of course, we're down about 15% since the beginning of September and a bunch more from this time last year.

Dow 9,625.28 +305.45; NASDAQ 1,780.12 +53.79; S&P 500 1,005.75 +39.45; NYSE Composite 6,345.09 +290.11

Advancers led decliners, 4621-1773, while the gap between new lows and new highs remained in favor of the bottom feeders, 144-20. Volume was considerable, considering the focus on elections rather than money for a day, though most of the action was on the NASDAQ, bringing up a rather curious circumstance: Are investors looking more to small caps and technology rather than blue chip stocks in a potential Obama administration?

NYSE Volume 1,308,074,000
NASDAQ Volume 2,333,323,000

Oil jumped $6.62, to $70.53, on OPEC production cuts, though the figure is probably not sustainable despite the coming holidays and colder weather. Demand is slack, and output cuts aren't going to change the dynamic of conservation and penny-pinching at the pump. Gold was up $30.50, to $757.30, and silver gained 38 cents, to $10.13, reversing the predominant trend. The gains in the metals is another curiosity. Are gold-bugs preparing for trouble, like a long night of vote-counting, possible violence over rigged results, or are we reading into the figures too much?

We will know, soon, hopefully within hours. For election stories, check out our Live Blogging of the Election.

Monday, November 3, 2008

Wall Street Takes a Break as Elections Loom

Investors were in a laid-back mood the day before America's critical presidential and congressional elections on Tuesday. With Barack Obama leading all of the major polls, there doesn't seem to be any sign of an exodus from stocks, as more than a few right-leaning pundits have suggested.

Rather, Wall Street spent most of Monday trading in a narrow range, sporting a wait-and-see attitude. Since election results won't be known until well after the close of trading on Tuesday, Election Day may turn look somewhat similar, with volume weak, the indices largely unchanged and trading limited to rounding out positions.

Dow 9,319.83 -5.18; NASDAQ 1,726.33 +5.38; S&P 500 966.30 -2.45; NYSE Composite 6,054.98 -6.11

Advancing issues beat decliners, 3563-2778. The gap between new lows and new highs continued to compress, down to 132 new lows to 21 new highs.

In economic news, which continues to be depressing, the ISM Manufacturing Index fell more than expected, to 38.9 in October, from 44.5 in September. This is really nothing new. The manufacturing sector hasn't been the beneficiary of good news in well over two years.

Much in the same vein, the three major US automakers - General Motors, Chrysler and Ford - saw their sales for October drop 45, 35 and 30%, respectively. They were not alone, however, as foreign automakers also saw sales slump. Toyota's sales fell 23%; Nissan's sales were down 33%. Honda was off 25%.

Normally, that kind of news would have sent stocks into a tailspin, but this was no ordinary day wrapped within an extraordinary two months on Wall Street. Bad news is now already discounted, and, to a large degree, ignored. Stocks are already at levels not seen in years, though a retesting of the lows will likely occur within weeks once the election passes by.

Oil for December delivery lighted up by $3.90, sending the price for a barrel of crude to $63.91. Gold gained $8.60, to $726.60, while silver added 2 cents to $9.75 per ounce.

Volume was very light, as expected.

NYSE Volume 1,017,059,000
NASDAQ Volume 1,808,486,000