For all of the optimism associated with a 3-or-4-day winning streak (depending on the index) and a big upside day on Wednesday, it may come as somewhat of a surprise to some that the major US equity indices all ended the week with losses.
The widely-watched Dow Jones Industrial Average tacked on more losses to Thursday's massive beat-down in Friday's one-sided trade, sending the index into negative ground, down 77 points for the week. The NASDAQ fared better, down less than a point since last Friday. The S&P 500 gave back 6 points, while the NYSE Composite finished higher by a slim 0.28 points.
Were the markets stabilizing? Hardly. Investors not only had to navigate through a slew of 4th quarter and full year 2008 earnings reports, but the stew of demoralizing economic reports continued in deluge fashion. There were some hopeful signs - like the government's initial estimate of 4th quarter '08 GDP posting a decline of 3.8% (better than estimates) - but not enough to keep serious money on the sidelines or increasingly heading toward bonds and precious metals.
Dow 8,000.86, -148.15 (1.82%)
NASDAQ 1,476.42, -31.42 (2.08%)
S&P 500 825.88, -19.26 (2.28%)
NYSE Composite 5,195.83, -105.07 (1.98%)
Also, the averages are not showing any signs of making upside progress. Since the fallout of November 20, they have recovered slightly, but mostly went sideways.
This being the final trading day of January, it should come as no comfort that the January Barometer is clearly indicating a down year for stocks in 2009, with all major indices closing the month anywhere from 7 to 9% lower than they had begun. Based on the adage "as goes January, so goes the year," the January Barometer has as solid a track record as any simple indicator, with accuracy in the range of upwards of 80%, depending on which sources are cited.
The day's internals were as unappealing as the headline numbers. Declining issues outflanked advancers, 4558-1903. There were more new lows than new highs, 253-12. This is the most troubling of all indicators, due entirely to its persistence. There have been only a handful of days where this condition did not persist - i.e., more new lows than highs in the daily data - since I have been tracking it since October 31, 2007. This is a 15-month, one-sided trend that has always declared general direction.
Of course, this was the natural conclusion of a 54 or 58-week bull market from 2003-2007 - one of the longest in history - built mostly on bad investments, incompetent fiscal policy, absence of regulations and general thievery. That's why the correction has been so severe. The foundation of the previous bull was built on sand.
Volume was as strong on Friday as it was on Tuesday's 200-point Dow rally, which also is not encouraging for stocks. Not to worry, the same kind of serious correction is occurring around the globe.
NYSE Volume 1,500,684,000
NASDAQ Volume 2,108,279,000
Commodities were the place to be. Crude oil was up 24 cents, to $41.68, though natural gas futures fell to $4.39, an obviator of oversupply. Gold zipped ahead $21.90, to $928.40, a multi-week high. Silver advanced 42 cents, to $12.57, making silver no longer a bargain and possibly short-term oversold, though it may be risky to rest on that assumption.
Employment and housing continue to be the main trouble spots in the economy, and those areas are likely to continue to deteriorate until there's some real relief for the middle class in government policy, namely, immediate tax relief via relaxed withholding, though our pals in Washington don't seem to like that idea. Since asking for a government wage and spending freeze would likely be too much, I won't bother to ask for actual spending cuts. The so-called "leaders" of our age are proving to be among the most incompetent bunch in history (unless you buy the conspiracy side of the argument for "big government"), unable to manage affairs of state effectively.
The world will wait while Washington winces, whines and wails. That's unfortunate because people must move on towards an improved existence. It is the history of civilization and should not be short-circuited by failures of financial creations.
To replace the broken models of the past, new ideas must be developed .
Friday, January 30, 2009
Thursday, January 29, 2009
Investors Find No Easy Way Out
The stock market is a fickle beast.
No sooner than one believes one thing, conditions change to make the opposite true. That's why stocks go up and down. Yes, really.
After yesterday's rally on news that Tim Geithner was confirmed as Treasury Secretary and was boosting plans for a "bad bank" bailout for the endangered species that are large commercial banks, and the Obama administration was toasting with congressional cohorts their $800+ billion stimulus plan, news changed.
Starbucks plans to close more stores and lay off 7000 more employees. Ditto Boeing, ditto Kodak, and others. New home sales for 2008 sank to their lowest level in 26 years. There were record numbers of first-time unemployment claims filed last week. Durable goods orders fell another 2.6% in just one month. Pundits far and wide were assailing the stimulus plan as too little, too late. In the relatively short span between Wednesday's closing bell and Thursday's open (a scant 17 1/2 hours) the mood had changed.
But, if you're a chartist with keen observational skills, you already knew that stocks could not sustain any meaningful rally. As I mentioned just two days ago, in my post, Why Stocks Won't Move:
Well, on Wednesday, the Dow did gain 200 points. And on Thursday, it fell by 226, closing at 8149.01. Hmmm... seems somebody's a penny off. Close enough, though, because nobody's perfect. Since 4:00 pm this afternoon, however, I have been answering the phone with the salutation, "Hello, resident genius."
Dow 8,149.01, -226.44 (2.70%)
NASDAQ 1,507.84, -50.50 (3.24%)
S&P 500 845.14, -28.95 (3.31%)
NYSE Composite 5,300.77, -200.69 (3.65%)
The condition of the economy is decidedly poor. The politicos in Washington can try to spin in any way they like, but many Americans - squeezed by ridiculous utility bills, overtaxed to near-death, and now many of them out of work and soon to be out on the street - are not schmoozing with cocktails after work. Many are just lucky enough to be able to afford dinner and maybe a malt liquor or pale ale.
Once again, the big-wigs in DC are sending the same wrong message as the CEOs and top executives on Wall Street. The Wall Street crowd has been chided by the government, so it's the public's right to express anger at elected officials.
Shame on you, Mr. Obama, Ms. Pelosi, Mr. Reid, Mr. McConnell, Mr. Boehner. Having cocktails while people are hungry, homeless, jobless and yearning smacks of elitism. I voted for Mr. Obama. I'm sure he was a better choice than McCain, but I'll say this just once: "Bush wrecked the economy, now it's Obama's turn to make it worse." I hope I'm wrong.
On the day, declining issues overwhelmed advancers, 5200-1333. 176 stocks made new 52-week lows. Only 16 made new highs. Volume was uninspired.
NYSE Volume 1,435,231,000
NASDAQ Volume 1,939,281,000
Oil fell another 72 cents, to $41.44. Gold picked up the slack, gaining $16.50, to $906.50. Silver also was higher, up 18 cents, to $12.15. Lean hogs and live cattle were little changed, but they are much lower than at this time last year. Food and energy have fallen precipitously in the deflationary cycle, perhaps providing some little modicum of comfort in this era of widespread distress.
Tomorrow, the government releases preliminary data on 4th quarter GDP and it's expected to show a contraction of roughly 5%. While that news will be neither surprising nor conclusive, it will confirm that the economy is in the throes of a deep, dark, dismal retreat.
Sure, Senator, the Resident Genius would like a screaming orgasm and some of that pulled pork you're passing around, thank you.
No sooner than one believes one thing, conditions change to make the opposite true. That's why stocks go up and down. Yes, really.
After yesterday's rally on news that Tim Geithner was confirmed as Treasury Secretary and was boosting plans for a "bad bank" bailout for the endangered species that are large commercial banks, and the Obama administration was toasting with congressional cohorts their $800+ billion stimulus plan, news changed.
Starbucks plans to close more stores and lay off 7000 more employees. Ditto Boeing, ditto Kodak, and others. New home sales for 2008 sank to their lowest level in 26 years. There were record numbers of first-time unemployment claims filed last week. Durable goods orders fell another 2.6% in just one month. Pundits far and wide were assailing the stimulus plan as too little, too late. In the relatively short span between Wednesday's closing bell and Thursday's open (a scant 17 1/2 hours) the mood had changed.
But, if you're a chartist with keen observational skills, you already knew that stocks could not sustain any meaningful rally. As I mentioned just two days ago, in my post, Why Stocks Won't Move:
The US equity markets are so solidly stalled, constipated and intractable for one simple reason. They have yet to retest the November 20 lows. Until that task is accomplished, there will be no meaningful rally in stocks, as there is no chart confirmation and thus, no commitment.
This is not to say that the Dow cannot escape the clutches of 7500 and change, though the current battle line clearly has been set at the most reasonable level of 8149. Stocks could easily advance another couple hundred points without anyone questioning whether or not they're overbought.
Well, on Wednesday, the Dow did gain 200 points. And on Thursday, it fell by 226, closing at 8149.01. Hmmm... seems somebody's a penny off. Close enough, though, because nobody's perfect. Since 4:00 pm this afternoon, however, I have been answering the phone with the salutation, "Hello, resident genius."
Dow 8,149.01, -226.44 (2.70%)
NASDAQ 1,507.84, -50.50 (3.24%)
S&P 500 845.14, -28.95 (3.31%)
NYSE Composite 5,300.77, -200.69 (3.65%)
The condition of the economy is decidedly poor. The politicos in Washington can try to spin in any way they like, but many Americans - squeezed by ridiculous utility bills, overtaxed to near-death, and now many of them out of work and soon to be out on the street - are not schmoozing with cocktails after work. Many are just lucky enough to be able to afford dinner and maybe a malt liquor or pale ale.
Once again, the big-wigs in DC are sending the same wrong message as the CEOs and top executives on Wall Street. The Wall Street crowd has been chided by the government, so it's the public's right to express anger at elected officials.
Shame on you, Mr. Obama, Ms. Pelosi, Mr. Reid, Mr. McConnell, Mr. Boehner. Having cocktails while people are hungry, homeless, jobless and yearning smacks of elitism. I voted for Mr. Obama. I'm sure he was a better choice than McCain, but I'll say this just once: "Bush wrecked the economy, now it's Obama's turn to make it worse." I hope I'm wrong.
On the day, declining issues overwhelmed advancers, 5200-1333. 176 stocks made new 52-week lows. Only 16 made new highs. Volume was uninspired.
NYSE Volume 1,435,231,000
NASDAQ Volume 1,939,281,000
Oil fell another 72 cents, to $41.44. Gold picked up the slack, gaining $16.50, to $906.50. Silver also was higher, up 18 cents, to $12.15. Lean hogs and live cattle were little changed, but they are much lower than at this time last year. Food and energy have fallen precipitously in the deflationary cycle, perhaps providing some little modicum of comfort in this era of widespread distress.
Tomorrow, the government releases preliminary data on 4th quarter GDP and it's expected to show a contraction of roughly 5%. While that news will be neither surprising nor conclusive, it will confirm that the economy is in the throes of a deep, dark, dismal retreat.
Sure, Senator, the Resident Genius would like a screaming orgasm and some of that pulled pork you're passing around, thank you.
Wednesday, January 28, 2009
Fed Doublespeak, Bad Bank Idea Signal Bull Run
Forget the idea that earnings move the market. Most of the firms which reported 4Q and full year results between Tuesday and Wednesday's close actually showed negative comparisons to year-ago figures for both revenue and earnings. What mattered most today was that congress is about to pass a nearly $900 billion spending bill and Tim Geithner, the newly-confirmed Treasury Secretary, will go about buying up all of the bad assets on the books of the major banks, in effect, creating a "bad bank" for which to orderly dispose of those nasty ill-advised and now non-performing loans.
It's a great day for inflationists. Unfortunately, it's a bad day for the value of the dollar and not such a great day for anybody who recently lost his or her job. There's nothing in the bill which will actually create new, private sector jobs, which is what - long term - is needed to stabilize and grow the economy.
Never minding the inflationary implications of government boosterism, investors went absolutely ballistic, sending the US indices on a rocket ride higher.
Dow 8,375.45, +200.72 (2.46%)
NASDAQ 1,558.34, +53.44 (3.55%)
S&P 500 874.09, +28.38 (3.36%)
NYSE Composite 5,501.49, +186.05 (3.50%)
The measure passed in the House contains a hodge-podge of government spending and tax relief, though nothing which directly affects either housing or employment, currently the two keys to any kind of economic betterment. Much of the criticism being directed at the government stimulus plan is that it will not begin working soon enough to have a meaningful near-term impact.
The Fed, after meeting for two days, did exactly nothing more than snort out a few missives about how the economy continued to deteriorate and how they were prepared to engage in - though they are not currently - direct purchases of Treasury debt securities. Keeping the key rate at "Zero to 25 basis points" the Fed is effectively out of policy bullets. Clearly, from the release notes of their meeting, deflation is the enemy, though it is not mentioned by name. Included was this nugget, which underscores the Fed's inflation leaning:
Just how the Fed manages to justify the differences of "inflation" and "price stability" was not covered by the release because, of course, their position is impossible to attain.
Today's speculative fling was obviously based on false hopes in that the market "gapped up" at the opening bell. It's a sign that investor optimism has not been fully demolished by recent events. And it was just yesterday that I mentioned that stocks could only gain a few hundred points because they had yet to retest the lows. How prescient of the market... and me!
Markets hate gaps and always find ways to fill them. This market had been stuck between 8149 and 8200 on the Dow. Today, it simply ignored the level. Danger lurks in today's gaps, but the public is being prepared for another onslaught of negative news, most likely not until March, however. Clearly, stocks have further to fall from these levels.
Optimism was as naked today as a bull's backside as advancing issues trounced decliners, 5412-1178. Plenty of pent-up investor demand went to work. Volume was reasonable. New lows outpolled new highs, 111-15.
NYSE Volume 1,548,266,000
NASDAQ Volume 2,160,559,000
Speculators in commodity markets were less convinced. Oil gained a sparing 58 cents, to $42.16. Gold fell $11.40, to $890.00, while silver lost 21 cents, to $11.96. The unmistakable signal from commodities are bearish and deflationary, right in line with slack demand and tight credit markets.
After the bell, Starbucks reported earnings and revenue that missed estimates and says it will cut 6,700 jobs in '09.
Enjoy your latte. The government and Wall Street are supplying the froth.
It's a great day for inflationists. Unfortunately, it's a bad day for the value of the dollar and not such a great day for anybody who recently lost his or her job. There's nothing in the bill which will actually create new, private sector jobs, which is what - long term - is needed to stabilize and grow the economy.
Never minding the inflationary implications of government boosterism, investors went absolutely ballistic, sending the US indices on a rocket ride higher.
Dow 8,375.45, +200.72 (2.46%)
NASDAQ 1,558.34, +53.44 (3.55%)
S&P 500 874.09, +28.38 (3.36%)
NYSE Composite 5,501.49, +186.05 (3.50%)
The measure passed in the House contains a hodge-podge of government spending and tax relief, though nothing which directly affects either housing or employment, currently the two keys to any kind of economic betterment. Much of the criticism being directed at the government stimulus plan is that it will not begin working soon enough to have a meaningful near-term impact.
The Fed, after meeting for two days, did exactly nothing more than snort out a few missives about how the economy continued to deteriorate and how they were prepared to engage in - though they are not currently - direct purchases of Treasury debt securities. Keeping the key rate at "Zero to 25 basis points" the Fed is effectively out of policy bullets. Clearly, from the release notes of their meeting, deflation is the enemy, though it is not mentioned by name. Included was this nugget, which underscores the Fed's inflation leaning:
Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
Just how the Fed manages to justify the differences of "inflation" and "price stability" was not covered by the release because, of course, their position is impossible to attain.
Today's speculative fling was obviously based on false hopes in that the market "gapped up" at the opening bell. It's a sign that investor optimism has not been fully demolished by recent events. And it was just yesterday that I mentioned that stocks could only gain a few hundred points because they had yet to retest the lows. How prescient of the market... and me!
Markets hate gaps and always find ways to fill them. This market had been stuck between 8149 and 8200 on the Dow. Today, it simply ignored the level. Danger lurks in today's gaps, but the public is being prepared for another onslaught of negative news, most likely not until March, however. Clearly, stocks have further to fall from these levels.
Optimism was as naked today as a bull's backside as advancing issues trounced decliners, 5412-1178. Plenty of pent-up investor demand went to work. Volume was reasonable. New lows outpolled new highs, 111-15.
NYSE Volume 1,548,266,000
NASDAQ Volume 2,160,559,000
Speculators in commodity markets were less convinced. Oil gained a sparing 58 cents, to $42.16. Gold fell $11.40, to $890.00, while silver lost 21 cents, to $11.96. The unmistakable signal from commodities are bearish and deflationary, right in line with slack demand and tight credit markets.
After the bell, Starbucks reported earnings and revenue that missed estimates and says it will cut 6,700 jobs in '09.
Enjoy your latte. The government and Wall Street are supplying the froth.
Tuesday, January 27, 2009
Why Stocks Won't Move
The US equity markets are so solidly stalled, constipated and intractable for one simple reason. They have yet to retest the November 20 lows. Until that task is accomplished, there will be no meaningful rally in stocks, as there is no chart confirmation and thus, no commitment.
This is not to say that the Dow cannot escape the clutches of 7500 and change, though the current battle line clearly has been set at the most reasonable level of 8149. Stocks could easily advance another couple hundred points without anyone questioning whether or not they're overbought.
Stocks look cheap if you're an optimist. They appear somewhat more ghastly if you are not so easily persuaded. Realists are somewhere in the middle and probably, because they generally prove to think with their heads, invested in gold. (For those of you who cannot afford much gold, there is always silver, just as good, and historically cheap by comparison.)
For purposes of clarification, the Dow closed above our magic number today, though the entire day's range was covered by yesterday's, so the import of Tuesday's tidy gain was minimal in the larger scheme.
Dow 8,174.73 Up 58.70 (0.72%)
NASDAQ 1,504.90 Up 15.44 (1.04%)
S&P 500 845.71 Up 9.14 (1.09%)
NYSE Compos 5,315.44 Up 70.83 (1.35%)
The usual spate of bad news helped keep investors in place on Tuesday, though there is still evidence that not everyone has been convinced that stocks are not where one should be putting his or her money.
More than 10,000 additional layoffs were announced on Tuesday, from companies as broad-based as Best Buy, Corning, IBM, Target, Baker Hughes and Avery Dennison. More than 70,000 corporate layoffs were announced on Monday.
NYSE Volume 1,171,004,000
NASDAQ Volume 1,819,427,000
The Conference Board also reported, earlier in the day, that their measure of consumer confidence had fallen to an all-time low of 37.7. The Case Shiller Home Price Index found that home prices had fallen by 18.18% in November from a year ago, the largest such decline in the history of the survey.
Advancing issues galloped ahead of decliners, 4253-2266. There were more new lows than new highs, 172-16. Volume was once again pathetic and indicative of a market with no conviction whatsoever.
And who can blame them? Layoffs continue to be announced daily, corporate profits, though many are beating expectations, are generally lower than for the same period last year. Many companies are showing significant strains and signs that business has slowed in an unprecedented manner.
Oil was also a victim of the deflationary environment, losing $4.15, to $41.58. Gold dipped $9.30, to $901.40. Silver bucked the trend, gaining 12 cents, to $12.18. Natural gas continued to wallow near lows, losing a penny to $4.44.
This is not to say that the Dow cannot escape the clutches of 7500 and change, though the current battle line clearly has been set at the most reasonable level of 8149. Stocks could easily advance another couple hundred points without anyone questioning whether or not they're overbought.
Stocks look cheap if you're an optimist. They appear somewhat more ghastly if you are not so easily persuaded. Realists are somewhere in the middle and probably, because they generally prove to think with their heads, invested in gold. (For those of you who cannot afford much gold, there is always silver, just as good, and historically cheap by comparison.)
For purposes of clarification, the Dow closed above our magic number today, though the entire day's range was covered by yesterday's, so the import of Tuesday's tidy gain was minimal in the larger scheme.
Dow 8,174.73 Up 58.70 (0.72%)
NASDAQ 1,504.90 Up 15.44 (1.04%)
S&P 500 845.71 Up 9.14 (1.09%)
NYSE Compos 5,315.44 Up 70.83 (1.35%)
The usual spate of bad news helped keep investors in place on Tuesday, though there is still evidence that not everyone has been convinced that stocks are not where one should be putting his or her money.
More than 10,000 additional layoffs were announced on Tuesday, from companies as broad-based as Best Buy, Corning, IBM, Target, Baker Hughes and Avery Dennison. More than 70,000 corporate layoffs were announced on Monday.
NYSE Volume 1,171,004,000
NASDAQ Volume 1,819,427,000
The Conference Board also reported, earlier in the day, that their measure of consumer confidence had fallen to an all-time low of 37.7. The Case Shiller Home Price Index found that home prices had fallen by 18.18% in November from a year ago, the largest such decline in the history of the survey.
Advancing issues galloped ahead of decliners, 4253-2266. There were more new lows than new highs, 172-16. Volume was once again pathetic and indicative of a market with no conviction whatsoever.
And who can blame them? Layoffs continue to be announced daily, corporate profits, though many are beating expectations, are generally lower than for the same period last year. Many companies are showing significant strains and signs that business has slowed in an unprecedented manner.
Oil was also a victim of the deflationary environment, losing $4.15, to $41.58. Gold dipped $9.30, to $901.40. Silver bucked the trend, gaining 12 cents, to $12.18. Natural gas continued to wallow near lows, losing a penny to $4.44.
Monday, January 26, 2009
What the Market Knows (and Washington Doesn't)
Monday's attempted push into higher ground was cut short by the very same forces which pushed it down to these levels in the first place: jobs, bank failures and government deficits.
The key sticking point, which the market understands (as do most chartists, but not politicians) is the 8149 level on the Dow. Why that spot is so stubborn and steadfast, not allowing movement beyond it, now that it has been violated, is that it is the interim closing low (Dec. 1) following the devastating bottom of November 20 (7552.29). Since violating this level by closing at 7949.09 on January 20, the index has tried to break out every day since. On January 21, the Dow did manage to hold on, at the close, at 8228.10, but since has closed below 8149 three consecutive sessions.
This is a troubling scenario. Not even the unexpected rise in existing home sales (+6.5%, though the median home price continues to fall) and the Conference Board's rosier outcome in the Leading Indicators (+0.3%) could keep stocks sufficiently in the green to call today's effort a true rally.
As a matter of fact, the Dow finished more than 100 points off its high, which was achieved shortly after the pair of announcements at 10:00 am. It was only a late day surge that allowed the index to finish with any gain at all. Other indices were similarly in positive territory at the close, though with marginal gains.
Dow 8,116.03, +38.47 (0.48%)
NASDAQ 1,489.46, +12.17 (0.82%)
S&P 500 836.57, +4.62 (0.56%)
NYSE Composite 5,244.67, +49.12 (0.95%)
Perhaps equally troubling was the lack of commitment as measured by volume, off sharply from last week's somewhat more spirited efforts. On the day, advancing issues finished well ahead of decliners, 4207-2354, though the gap between new lows and highs remains troubling, with new lows ahead once more, 200-16.
NYSE Volume 1,269,394,000
NASDAQ Volume 1,841,378,000
Crude oil finished the day with a loss of 74 cents, easing to $45.73 at the close after trading as high as $48.05. Gold continued its own little winning streak, gaining $13.00, to $910.70. the first close above the $900 mark since early December. Silver tagged along with a gain of 17 cents, closing at $12.11. We are beginning to be convinced that the only safe place for your cash - besides in a mattress - is in precious metals.
What the politicians in Washington don't seem to understand at this juncture is twofold: first, that the stock market will not respond blindly to their grandstanding on economic issues and postures on bailouts, stimulus packages and the like, and second, that the number of Americans out of work or underemployed has now reached crisis proportions.
Just today, another 68,000+ layoffs were announced, by titans such as Caterpillar (20,000), Pfizer (merging with Wyeth, 26,000), Sprint Nextel (8000) and Home Depot (7000). Other companies, such as Dutch financial firm ING, and farm equipment maker Deere, also announced layoffs which slice across national borders.
The US economy shed 2.6 million jobs in 2008 - the most since 1945 - and there have already been 200,000 announced layoffs this year, though the real figures of unemployed and underemployed continue to spiral to nosebleed levels. Some estimates have the total of both groups already at 13-15% of the adult labor force.
In Washington, there's plenty of pomp and posture about how to correct the dilemma, but it surely seems that the worst is still ahead as the effects of multiple retail chain store closings and the consequent defaults in commercial loan portfolios begin to ripple through the economy.
Our political leaders have yet to either catch on or level with the American people about the depth of our economic crisis, preferring to "stick to their agenda" while offering little in the way of serious stimulative effort.
The stock market is just another ticking time bomb at this point. Anybody telling you to buy stocks here just doesn't understand the fix we're in and might as well instruct you to throw money down a well.
The key sticking point, which the market understands (as do most chartists, but not politicians) is the 8149 level on the Dow. Why that spot is so stubborn and steadfast, not allowing movement beyond it, now that it has been violated, is that it is the interim closing low (Dec. 1) following the devastating bottom of November 20 (7552.29). Since violating this level by closing at 7949.09 on January 20, the index has tried to break out every day since. On January 21, the Dow did manage to hold on, at the close, at 8228.10, but since has closed below 8149 three consecutive sessions.
This is a troubling scenario. Not even the unexpected rise in existing home sales (+6.5%, though the median home price continues to fall) and the Conference Board's rosier outcome in the Leading Indicators (+0.3%) could keep stocks sufficiently in the green to call today's effort a true rally.
As a matter of fact, the Dow finished more than 100 points off its high, which was achieved shortly after the pair of announcements at 10:00 am. It was only a late day surge that allowed the index to finish with any gain at all. Other indices were similarly in positive territory at the close, though with marginal gains.
Dow 8,116.03, +38.47 (0.48%)
NASDAQ 1,489.46, +12.17 (0.82%)
S&P 500 836.57, +4.62 (0.56%)
NYSE Composite 5,244.67, +49.12 (0.95%)
Perhaps equally troubling was the lack of commitment as measured by volume, off sharply from last week's somewhat more spirited efforts. On the day, advancing issues finished well ahead of decliners, 4207-2354, though the gap between new lows and highs remains troubling, with new lows ahead once more, 200-16.
NYSE Volume 1,269,394,000
NASDAQ Volume 1,841,378,000
Crude oil finished the day with a loss of 74 cents, easing to $45.73 at the close after trading as high as $48.05. Gold continued its own little winning streak, gaining $13.00, to $910.70. the first close above the $900 mark since early December. Silver tagged along with a gain of 17 cents, closing at $12.11. We are beginning to be convinced that the only safe place for your cash - besides in a mattress - is in precious metals.
What the politicians in Washington don't seem to understand at this juncture is twofold: first, that the stock market will not respond blindly to their grandstanding on economic issues and postures on bailouts, stimulus packages and the like, and second, that the number of Americans out of work or underemployed has now reached crisis proportions.
Just today, another 68,000+ layoffs were announced, by titans such as Caterpillar (20,000), Pfizer (merging with Wyeth, 26,000), Sprint Nextel (8000) and Home Depot (7000). Other companies, such as Dutch financial firm ING, and farm equipment maker Deere, also announced layoffs which slice across national borders.
The US economy shed 2.6 million jobs in 2008 - the most since 1945 - and there have already been 200,000 announced layoffs this year, though the real figures of unemployed and underemployed continue to spiral to nosebleed levels. Some estimates have the total of both groups already at 13-15% of the adult labor force.
In Washington, there's plenty of pomp and posture about how to correct the dilemma, but it surely seems that the worst is still ahead as the effects of multiple retail chain store closings and the consequent defaults in commercial loan portfolios begin to ripple through the economy.
Our political leaders have yet to either catch on or level with the American people about the depth of our economic crisis, preferring to "stick to their agenda" while offering little in the way of serious stimulative effort.
The stock market is just another ticking time bomb at this point. Anybody telling you to buy stocks here just doesn't understand the fix we're in and might as well instruct you to throw money down a well.
Friday, January 23, 2009
Who Flipped the Switch? and, Is the Fed Busted?
The action today on the markets was extraordinary, to say the least. When General Electric fessed up to a major revenue miss and 46% drop in profit, the market futures signaled a steep decline at the opening, which is exactly what happened. The Dow lost 200 points in the first few minutes of trading.
From there on, however, it was all hands on deck for the PPT and the foes of free markets. All but the Dow finished the day with small gains as the interventionists kept stocks from doing what they were supposed to do, drop like stones thrown off a cliff.
Dow 8,077.56, -45.24 (0.56%)
NASDAQ 1,477.29, +11.80 (0.81%)
S&P 500 827.68, +0.18 (0.02%)
NYSE Composite 5,195.55, +23.87 (0.46%)
I may sound pessimistic to many, and I'll admit that I don't see much but doom and gloom ahead, but that's for stocks, mostly. If you like shiny objects made of gold and silver, the future looks better. But, the backdrop of millions of jobs lost, families being put out on the street and people just plain afraid to spend money, does have a sobering effect. Stocks should head lower, below the levels of November 20. The p-e ratios of most of the S&P (sans financials) are still high, not indicative of stocks in a recession. But, despite my desire for a quick, painful revaluation, the Fed and the federal government will continue to unwind matters slowly. Stocks have fallen, and they will continue to fall, just not quite as quickly as some (me) would like.
So, right around 9:15, somebody over at the secret PPT bunker kicked the switch-flipper awake and things got going. Ben Bernanke's grubby little fingers were all over this particular episode.
On the day, advancers and decliners were virtually even, with the winners ahead slightly, 3223-3211. New lows maintained their edge over new highs, 315-13, actually expanding their advantage, yet another indication that a lows retest is upon us. Volume was eerily the same as it's been all week.
NYSE Volume 1,410,774,000
NASDAQ Volume 2,182,405,000
Whoever flipped that switch this morning, must have tripped the inflation lever as well, as commodities, mired in a deep recession, suddenly emerged as the big winners of the day. Oil gained $2.80, to finish the week at $46.47. Gold was up $37.00, to $895.80, briefly trading above $900. Silver rose 58 cents, hitting $11.94 an ounce at the close of NY trading. The big loser of the day was natural gas, down 17 cents to $4.49. While this may seem like a boon to householders heating with natural gas, the reality is that most utilities locked in higher prices months ago, so Mr. and Mrs. Average Joe and Jane won't see any reduction in this month's utility bill. Maybe next month, maybe not.
Yesterday, I promised something called a "blockbuster" report on the Fed and I've managed to piece together most of the salient facts and articles which lead me to believe that the Federal Reserve Bank, which has provided nothing less than massive inflation and destruction of the dollar over it's 95 years of existence, is, in fact, one big Ponzi scheme, making Bernie Madoff look like a piker by comparison. We begin with a tame somewhat mainstream video clip and proceed to the meat of the story of the Fed
The following video features Christopher Whalen of Institutional Risk Analytics, proposing that the bailouts of banks end and the government allow Sheila Bair of FDIC to do her job, which is, take the Citigroups and Bank of Americas of the world into receivership, liquidate the assets and move on with new, stronger entities. Naturally, this sensible approach will be completely ignored by our financial masters at the Fed and in the higher reaches of "our" federal government.
This concept actually dovetails nicely into the creation of a "bad bank" as a repository for all the toxic debt weighing down the balance sheets of financial firms. The concept is neatly outlined, defined and debated in Bad Bank Regains Favor As Solution for Toxic Debt.
A "bad bank" is exactly what the world's money masters need. It is likely to be the biggest bank in the world, as companies, governments and central banks deposit all of their crookedness into one big cesspool. Naturally, the assets and liabilities will never be made public, nobody will have to come clean, and all the world will be better off, especially the rich, greedy manipulators of finance.
Moving on, the details of how the Fed creates money out of thin air are boring in their detail, but suffice it to say that they have many means available to them to create wealth for themselves at the expense of the American public, and they use all of them in gross excess almost all of the time.
The most interesting articles, were this one, The Federal Reserve’s Blueprint for Market Intervention, by James Turk, in which he follows the sleuthing of researcher Elaine Supkis, who uncovered a 1961 TOP SECRET FED RESERVE GOLD EXCHANGE REPORT.
The details of these two articles compelled me to make them more widely available before somebody from NSA comes along and scrubs them from the web. They partially describe how the Fed is an unruly, corrupt organization, with black holes in their books and secrecy and deceit all around. Both are exceptional reads.
Finally, here's John Maudlin, suggesting that we "muddle through" for another decade or so, but he does offer a couple of other, more interesting scenarios.
From John Maudlin, in an article entitled, The Endgame:
While the Fed and Central Banks around the world are simply dissatisfied with stealing most of people's wealth and labor (They want it all!), they'll be betting on the side of the argument that keeps liquidity and money flowing at a high velocity. The US population, scared to death by Wall Street, trillion dollar deficits and the Fed running the printing presses around the clock, are going to be a serious counterbalance to any reflation effort. So, choose your poison: deflation or inflation. I'll bet dollars to doughnuts that it will be deflation first and inflation later: my few dollars will buy lots of doughnuts today and later, I'll sell the stale ones for 10 times what i paid.
We've already seen what $350 billion did to re-inflate and stimulate the banking sector. It cratered like a punctured beach ball. More money thrown at it will have a similar effect because the banks and the Fed and central banks around the world are so deep in debt and sunk by credit default swaps, debt reconstituted into securities, resold and defaulted again, that they will find no way out short of armed conflict, devaluation of currencies (starting with the US dollar).
So, that's it for the week. It's Friday; go have a beer or seven. I am on my way out for a couple gulps of Steel Reserve, a high gravity lager, which, considering the height of the "gravity" we face, only seems appropriate.
Cheers!
From there on, however, it was all hands on deck for the PPT and the foes of free markets. All but the Dow finished the day with small gains as the interventionists kept stocks from doing what they were supposed to do, drop like stones thrown off a cliff.
Dow 8,077.56, -45.24 (0.56%)
NASDAQ 1,477.29, +11.80 (0.81%)
S&P 500 827.68, +0.18 (0.02%)
NYSE Composite 5,195.55, +23.87 (0.46%)
I may sound pessimistic to many, and I'll admit that I don't see much but doom and gloom ahead, but that's for stocks, mostly. If you like shiny objects made of gold and silver, the future looks better. But, the backdrop of millions of jobs lost, families being put out on the street and people just plain afraid to spend money, does have a sobering effect. Stocks should head lower, below the levels of November 20. The p-e ratios of most of the S&P (sans financials) are still high, not indicative of stocks in a recession. But, despite my desire for a quick, painful revaluation, the Fed and the federal government will continue to unwind matters slowly. Stocks have fallen, and they will continue to fall, just not quite as quickly as some (me) would like.
So, right around 9:15, somebody over at the secret PPT bunker kicked the switch-flipper awake and things got going. Ben Bernanke's grubby little fingers were all over this particular episode.
On the day, advancers and decliners were virtually even, with the winners ahead slightly, 3223-3211. New lows maintained their edge over new highs, 315-13, actually expanding their advantage, yet another indication that a lows retest is upon us. Volume was eerily the same as it's been all week.
NYSE Volume 1,410,774,000
NASDAQ Volume 2,182,405,000
Whoever flipped that switch this morning, must have tripped the inflation lever as well, as commodities, mired in a deep recession, suddenly emerged as the big winners of the day. Oil gained $2.80, to finish the week at $46.47. Gold was up $37.00, to $895.80, briefly trading above $900. Silver rose 58 cents, hitting $11.94 an ounce at the close of NY trading. The big loser of the day was natural gas, down 17 cents to $4.49. While this may seem like a boon to householders heating with natural gas, the reality is that most utilities locked in higher prices months ago, so Mr. and Mrs. Average Joe and Jane won't see any reduction in this month's utility bill. Maybe next month, maybe not.
Yesterday, I promised something called a "blockbuster" report on the Fed and I've managed to piece together most of the salient facts and articles which lead me to believe that the Federal Reserve Bank, which has provided nothing less than massive inflation and destruction of the dollar over it's 95 years of existence, is, in fact, one big Ponzi scheme, making Bernie Madoff look like a piker by comparison. We begin with a tame somewhat mainstream video clip and proceed to the meat of the story of the Fed
The following video features Christopher Whalen of Institutional Risk Analytics, proposing that the bailouts of banks end and the government allow Sheila Bair of FDIC to do her job, which is, take the Citigroups and Bank of Americas of the world into receivership, liquidate the assets and move on with new, stronger entities. Naturally, this sensible approach will be completely ignored by our financial masters at the Fed and in the higher reaches of "our" federal government.
This concept actually dovetails nicely into the creation of a "bad bank" as a repository for all the toxic debt weighing down the balance sheets of financial firms. The concept is neatly outlined, defined and debated in Bad Bank Regains Favor As Solution for Toxic Debt.
A "bad bank" is exactly what the world's money masters need. It is likely to be the biggest bank in the world, as companies, governments and central banks deposit all of their crookedness into one big cesspool. Naturally, the assets and liabilities will never be made public, nobody will have to come clean, and all the world will be better off, especially the rich, greedy manipulators of finance.
Moving on, the details of how the Fed creates money out of thin air are boring in their detail, but suffice it to say that they have many means available to them to create wealth for themselves at the expense of the American public, and they use all of them in gross excess almost all of the time.
The most interesting articles, were this one, The Federal Reserve’s Blueprint for Market Intervention, by James Turk, in which he follows the sleuthing of researcher Elaine Supkis, who uncovered a 1961 TOP SECRET FED RESERVE GOLD EXCHANGE REPORT.
The details of these two articles compelled me to make them more widely available before somebody from NSA comes along and scrubs them from the web. They partially describe how the Fed is an unruly, corrupt organization, with black holes in their books and secrecy and deceit all around. Both are exceptional reads.
Finally, here's John Maudlin, suggesting that we "muddle through" for another decade or so, but he does offer a couple of other, more interesting scenarios.
From John Maudlin, in an article entitled, The Endgame:
The US (and indeed soon the whole world) is in a deep recession. The US is going to try and combat that recession with stimulus on a scale never before tried. It is a grand experiment. On the one hand is the theory that you can allocate stimulus and keep the velocity of money from falling. On the other hand is the theory that once the deleveraging process starts, there is not much you can do about it: it is going to work its way through the economy. We are about to find out which theory is correct.
While the Fed and Central Banks around the world are simply dissatisfied with stealing most of people's wealth and labor (They want it all!), they'll be betting on the side of the argument that keeps liquidity and money flowing at a high velocity. The US population, scared to death by Wall Street, trillion dollar deficits and the Fed running the printing presses around the clock, are going to be a serious counterbalance to any reflation effort. So, choose your poison: deflation or inflation. I'll bet dollars to doughnuts that it will be deflation first and inflation later: my few dollars will buy lots of doughnuts today and later, I'll sell the stale ones for 10 times what i paid.
We've already seen what $350 billion did to re-inflate and stimulate the banking sector. It cratered like a punctured beach ball. More money thrown at it will have a similar effect because the banks and the Fed and central banks around the world are so deep in debt and sunk by credit default swaps, debt reconstituted into securities, resold and defaulted again, that they will find no way out short of armed conflict, devaluation of currencies (starting with the US dollar).
So, that's it for the week. It's Friday; go have a beer or seven. I am on my way out for a couple gulps of Steel Reserve, a high gravity lager, which, considering the height of the "gravity" we face, only seems appropriate.
Cheers!
Thursday, January 22, 2009
Geithner Passes Committee; Housing, Unemployment Reach Records
Tim Geithner was approved by the Senate Finance Committee (guess we all can cheat on our taxes without worry now!) earlier today, as the process of confirmation as Treasury Secretary now passes to the full Senate. The AP wire lit up with the story at 12:37 pm EST, just about the same time the Dow crossed back above 8000 and started a mini-rally (by 2:15 pm, the Dow snuck past 8200).
Coincidence? I think not. Wall Street's fate is now tied to Geithner and how he and Ben Bernanke, over at the Fed, interact and respond to the ongoing obliteration of the nation's largest financial firms.
The euphoria over having one of their own (Geithner's resume is full of Wall Street, World Bank and NY Fed connections) with his hands nearly on the US Treasury quickly faded as those in the know remembered that the US government is carrying a debt load of close to $11 Trillion, so maybe Geithner won't be able to help in the long run. Shortly after 3:00 pm, the Dow was down 150 points again, and matters didn't improve much heading into the closing bell.
Dow 8,122.80, -105.30 (1.28%)
NASDAQ 1,465.49, -41.58 (2.76%)
S&P 500 827.50, -12.74 (1.52%)
NYSE Composite 5,171.74, -102.25 (1.94%)
On top of this is a growing concern over how stable the Federal Reserve is. Bearing in mind that the Fed is a private bank, albeit with deep tethers to the government, the Fed has been buying up more than its fair share of rotten assets and throwing around money like Bernie Madoff on an investor hunt.
With more and more economists and commentators openly saying that the large banking institutions are insolvent (something I and others have known and written about since 2007), reality is taking a heavy toll on investor sentiment. (I'll have much more about the Fed, the banks, the bailouts and our future in a blockbuster report tomorrow)
While the marketeers were making the most of their man being appointed to Treasury, an earnings miss and announced layoffs by Microsoft and more dismal data from the housing and employment sectors overhung the entire session, acting as the metaphorical ton of bricks weighing down all sectors.
New unemployment claims hit a level not reached since 1982, with 589,000 new applications for the week ended January 16.
New home construction and permits fell to record low levels in December, the Commerce Dept. reported.
Taken together, the news could not have been much worse, though investors are getting used to the endless stream of bad news coming out of government and private analyses. The poor earnings reports for the 4th quarter are a relatively recent add to the mix, but earnings season is getting into full swing. Google reports after the bell today. (Update: Google beat analyst expectations ($4.98), posting Non-GAAP EPS for the fourth quarter of 2008 of $5.10.)
Declining issues outweighed advancers by a wide margin, 4867-1560. New lows: 230. New highs: 12. Volume was consistent with the past few days, generally on the high side.
NYSE Volume 1,554,123,000
NASDAQ Volume 2,347,116,000
Oil finished with a 12 cent gain, closing at $43.67, though US inventories were reported 14% above last year's levels. Oil traded lower for much of the session before recovering into the close. Natural gas fell 9 cents, to $4.65. Gold gained $8.70, to $858.80; silver finished the day 4 cents to the good, at $11.37 the ounce.
A catalyst to propel the bulls has yet to emerge, though at this juncture, small bits, like Google's good report, may be enough to keep what little is left of investor confidence. Today's close on the Dow, however, was the second this week below 8149, the interim low (Dec. 1) following the November 20 collapse and bottom (7552).
The markets have traded sideways for two months running, so a betting man might be inclined to look for a change in dynamics. I make the prospects of closing below the Nov. 20 lows within a month at 70%, and a gain to 8750 in the same time frame almost nil.
Coincidence? I think not. Wall Street's fate is now tied to Geithner and how he and Ben Bernanke, over at the Fed, interact and respond to the ongoing obliteration of the nation's largest financial firms.
The euphoria over having one of their own (Geithner's resume is full of Wall Street, World Bank and NY Fed connections) with his hands nearly on the US Treasury quickly faded as those in the know remembered that the US government is carrying a debt load of close to $11 Trillion, so maybe Geithner won't be able to help in the long run. Shortly after 3:00 pm, the Dow was down 150 points again, and matters didn't improve much heading into the closing bell.
Dow 8,122.80, -105.30 (1.28%)
NASDAQ 1,465.49, -41.58 (2.76%)
S&P 500 827.50, -12.74 (1.52%)
NYSE Composite 5,171.74, -102.25 (1.94%)
On top of this is a growing concern over how stable the Federal Reserve is. Bearing in mind that the Fed is a private bank, albeit with deep tethers to the government, the Fed has been buying up more than its fair share of rotten assets and throwing around money like Bernie Madoff on an investor hunt.
With more and more economists and commentators openly saying that the large banking institutions are insolvent (something I and others have known and written about since 2007), reality is taking a heavy toll on investor sentiment. (I'll have much more about the Fed, the banks, the bailouts and our future in a blockbuster report tomorrow)
While the marketeers were making the most of their man being appointed to Treasury, an earnings miss and announced layoffs by Microsoft and more dismal data from the housing and employment sectors overhung the entire session, acting as the metaphorical ton of bricks weighing down all sectors.
New unemployment claims hit a level not reached since 1982, with 589,000 new applications for the week ended January 16.
New home construction and permits fell to record low levels in December, the Commerce Dept. reported.
Taken together, the news could not have been much worse, though investors are getting used to the endless stream of bad news coming out of government and private analyses. The poor earnings reports for the 4th quarter are a relatively recent add to the mix, but earnings season is getting into full swing. Google reports after the bell today. (Update: Google beat analyst expectations ($4.98), posting Non-GAAP EPS for the fourth quarter of 2008 of $5.10.)
Declining issues outweighed advancers by a wide margin, 4867-1560. New lows: 230. New highs: 12. Volume was consistent with the past few days, generally on the high side.
NYSE Volume 1,554,123,000
NASDAQ Volume 2,347,116,000
Oil finished with a 12 cent gain, closing at $43.67, though US inventories were reported 14% above last year's levels. Oil traded lower for much of the session before recovering into the close. Natural gas fell 9 cents, to $4.65. Gold gained $8.70, to $858.80; silver finished the day 4 cents to the good, at $11.37 the ounce.
A catalyst to propel the bulls has yet to emerge, though at this juncture, small bits, like Google's good report, may be enough to keep what little is left of investor confidence. Today's close on the Dow, however, was the second this week below 8149, the interim low (Dec. 1) following the November 20 collapse and bottom (7552).
The markets have traded sideways for two months running, so a betting man might be inclined to look for a change in dynamics. I make the prospects of closing below the Nov. 20 lows within a month at 70%, and a gain to 8750 in the same time frame almost nil.
Hedge Fund Oxymoron?
In a report released on Wednesday, tracking firm Hedge Fund Research said investors pulled $155 billion from the secretive portfolios.
What separates hedge funds from other, better regulated funds and investment vehicles is that hedge funds are chartered to engage in short selling, buying and selling options and other devices designed to "minimize risk." The whole idea behind the concept of hedge funds is that they can weather any kind of market and make money in any environment.
So why did they take - on average - a 19% beat-down in 2008? It seems that the hedges were trimmed when they should have been sprouting new branches. While mutual funds lost an average of 38% last year, the hedge funds should have been in a position to identify the enormous risks in the market and "hedge" accordingly.
But maybe the term is oxymoronic. Maybe the average hedge fund manager isn't any smarter than the guy with glasses who handles your pension plan, and maybe, despite the tools available to them, the hedge fund managers were not any more aware of what the banks were going through in 2007 and 2008, and failed in their charge to ameliorate risk by shorting, buying puts or exiting losing positions in timely manners.
When this ugly chapter of economics is finally unwound by financial historians, it's likely to be revealed that the clandestine hedge fund community was one of the major contributors to the extreme volatility in markets during the final three months of 2008, fleeing financials just like the rest of the duped investors who thought the subprime crisis was "contained" - a la Ben Bernanke - as markets and profits disappeared like the vapid promises of "higher returns."
Greed, an emotion which knows no bounds, is what attracted the rich and not-so-famous to hedge funds in the first place, and it is the same greed (masked as fear of losing their cash hoard) that is fueling the exodus today. Had the hedge funds really been on the ball, they would have profited from the relative ignorance of the rest of the market. Unfortunately, hedge fund managers turned out to be not the "smartest guys in the room," but merely a little smarter than the average broker.
Investing is largely about managing risk, and while the hedgies purported to managed risk better than the average, their losses - and subsequent redemptions - proved their fallibility and the underlying investment risk dictum, "nobody is immune."
What separates hedge funds from other, better regulated funds and investment vehicles is that hedge funds are chartered to engage in short selling, buying and selling options and other devices designed to "minimize risk." The whole idea behind the concept of hedge funds is that they can weather any kind of market and make money in any environment.
So why did they take - on average - a 19% beat-down in 2008? It seems that the hedges were trimmed when they should have been sprouting new branches. While mutual funds lost an average of 38% last year, the hedge funds should have been in a position to identify the enormous risks in the market and "hedge" accordingly.
But maybe the term is oxymoronic. Maybe the average hedge fund manager isn't any smarter than the guy with glasses who handles your pension plan, and maybe, despite the tools available to them, the hedge fund managers were not any more aware of what the banks were going through in 2007 and 2008, and failed in their charge to ameliorate risk by shorting, buying puts or exiting losing positions in timely manners.
When this ugly chapter of economics is finally unwound by financial historians, it's likely to be revealed that the clandestine hedge fund community was one of the major contributors to the extreme volatility in markets during the final three months of 2008, fleeing financials just like the rest of the duped investors who thought the subprime crisis was "contained" - a la Ben Bernanke - as markets and profits disappeared like the vapid promises of "higher returns."
Greed, an emotion which knows no bounds, is what attracted the rich and not-so-famous to hedge funds in the first place, and it is the same greed (masked as fear of losing their cash hoard) that is fueling the exodus today. Had the hedge funds really been on the ball, they would have profited from the relative ignorance of the rest of the market. Unfortunately, hedge fund managers turned out to be not the "smartest guys in the room," but merely a little smarter than the average broker.
Investing is largely about managing risk, and while the hedgies purported to managed risk better than the average, their losses - and subsequent redemptions - proved their fallibility and the underlying investment risk dictum, "nobody is immune."
Wednesday, January 21, 2009
Obama Bounce? No, It's a Geithner Gallop; eBay Disappoints
Stocks reversed nearly all of yesterday's losses after the New York Times posted an article with the glaring headline. Hearing Over, Geithner’s Confirmation Is Expected minutes before noon.
Stocks started out full of steam, but had surrendered most of their gains before that bastion of journalistic integrity asserted that Timothy Geithner's problems with not paying taxes on time would be sufficiently swept under the rug and he would be confirmed as the new Treasury Secretary. Such an appointment virtually assures more bad behavior on both Wall Street and in Washington, DC. The banks will continue to receive hefty sums of taxpayer dough from the Treasury without recourse nor accountability.
Tra, la, la, life as a bankrupt banker must be good with a capital G.
Dow 8,228.10, +279.01 (3.51%)
NASDAQ 1,507.07, +66.21 (4.60%)
S&P 500 840.24, +35.02 (4.35%)
NYSE Composite 5,273.9902, +215.93 (4.27%)
The advance was broad-based with gainers beating losers, 5011-1567. New lows retained their 14+ month edge over new highs, 278-10, notable in the minuscule number of new highs on such a large point gain. Volume was solid, a very optimistic indicator.
NYSE Volume 1,737,111,000
NASDAQ Volume 2,109,177,000
IBM's strong 4th quarter results also contributed to the sanguine tenor of the day. The computing giant returned impressive results after the close on Tuesday.
Commodities also got in on the rising price action, though oil's gain of $2.71 resulted in a closing price of $43.55, quite tame by recent standards. Gold continued to trade under pressure, losing $5.10, to $850.10. Silver gained 15 cents, to $11.33. Natural gas was also higher, gaining 12 cents, to $4.75 mmbtu.
After the close, eBay released 4th quarter and full year results. The company's 4th quarter returned lower revenue and earnings, and the stock sold off after-hours. Here [PDF] is a link to a graphical presentation.
Ebay-related revenue took a large hit. The largest revenue production came from PayPal, as the company struggles through a troubling transition in their core auction and fixed-price business. Essentially, the company has largely neglected the individual seller in favor of catering to larger enterprises. This has caused nothing short of a seller exodus over the past few months. Ebay executives put most of the blame on poor global economic conditions rather than taking the heat for their failed turnaround of a business that didn't need changing.
At this writing, ebay was trading at 12.52, down 0.76 in after-hours trading.
Stocks started out full of steam, but had surrendered most of their gains before that bastion of journalistic integrity asserted that Timothy Geithner's problems with not paying taxes on time would be sufficiently swept under the rug and he would be confirmed as the new Treasury Secretary. Such an appointment virtually assures more bad behavior on both Wall Street and in Washington, DC. The banks will continue to receive hefty sums of taxpayer dough from the Treasury without recourse nor accountability.
Tra, la, la, life as a bankrupt banker must be good with a capital G.
Dow 8,228.10, +279.01 (3.51%)
NASDAQ 1,507.07, +66.21 (4.60%)
S&P 500 840.24, +35.02 (4.35%)
NYSE Composite 5,273.9902, +215.93 (4.27%)
The advance was broad-based with gainers beating losers, 5011-1567. New lows retained their 14+ month edge over new highs, 278-10, notable in the minuscule number of new highs on such a large point gain. Volume was solid, a very optimistic indicator.
NYSE Volume 1,737,111,000
NASDAQ Volume 2,109,177,000
IBM's strong 4th quarter results also contributed to the sanguine tenor of the day. The computing giant returned impressive results after the close on Tuesday.
Commodities also got in on the rising price action, though oil's gain of $2.71 resulted in a closing price of $43.55, quite tame by recent standards. Gold continued to trade under pressure, losing $5.10, to $850.10. Silver gained 15 cents, to $11.33. Natural gas was also higher, gaining 12 cents, to $4.75 mmbtu.
After the close, eBay released 4th quarter and full year results. The company's 4th quarter returned lower revenue and earnings, and the stock sold off after-hours. Here [PDF] is a link to a graphical presentation.
Ebay-related revenue took a large hit. The largest revenue production came from PayPal, as the company struggles through a troubling transition in their core auction and fixed-price business. Essentially, the company has largely neglected the individual seller in favor of catering to larger enterprises. This has caused nothing short of a seller exodus over the past few months. Ebay executives put most of the blame on poor global economic conditions rather than taking the heat for their failed turnaround of a business that didn't need changing.
At this writing, ebay was trading at 12.52, down 0.76 in after-hours trading.
Tuesday, January 20, 2009
Roubini: "systemic banking crisis"; Obama: "the time has come"
As Washington, DC became a grand celebration with the inauguration of Barack Obama, the 44th President of the United States of America, a far different mood was spilling out of the stock exchanges and broker/dealer offices of Wall Street.
The juxtaposition of moods and emotions could not be more stark between the Capitol and the Big Apple. While Obama was reminding us of the nation's greatness, Wall Street was dealing with the current reality of a systemic banking failure. Speaking in Dubai, New York University Professor Nouriel Roubini, who has been one of the leading voices predicting the global financial crisis, said that US banks are "effectively insolvent," adding that total financial losses could reach the staggering sum of $3.6 Trillion.
There is no doubt that the economy will be the stiffest challenge presented to the newly-minted President. Obama, in close contact with the congress, is already working on a financial rescue package which will total over $800 billion in tax breaks and incentives over the next two years. Whether the medicine spooned out by Washington will cure the sick patients of Wall Street is still suspect. The wheels, however, will turn, for better or for worse, and business will continue, in whatever form it takes.
As President Obama made his way to the Capitol to take his oath of office, markets around the world were reeling. The Dow Jones Industrials quickly sank below 8100, the fourth consecutive session in which it has declined beyond that mark. The catalysts for the decline were the same as they have been throughout: the banks and financial institutions that continue to write down massive, unpayable debt, begging for help from stunned legislators while destroying investor confidence and trust in markets.
So it was that the new president was greeted with a massive loss on US equity markets, which ended the session with the worst losses of the new year.
Dow 7,949.09, -332.13 (4.01%)
NASDAQ 1,440.86, -88.47 (5.78%)
S&P 500 805.22. -44.90 (5.28%)
NYSE Composite 5,058.0601, -329.44 (6.11%)
Advancing issues were overwhelmed by decliners, 5655-833, one of the most lopsided showings in months, even though the past few months have been nothing but an endless string of declines in the broad markets. New lows arched ahead of new highs, as expected, 328-18, expanding both the number of new lows and the margin of lows to highs. Volume was once more light, considering the loose selling all around, but, as mentioned in earlier posts, smaller volume figures are more or less going to be a fixture for some time to come. Small investors have been spooked, hedge funds are largely out, and big brokerages (are there any left?) have trimmed their positions significantly.
NYSE Volume 1,718,511,000
NASDAQ Volume 2,014,633,000
On the commodities side, oil, which began a new futures contract today (March), gained from the closing February contract, up $2.23, to $38.74. Gold rebounded sharply, adding $15.30, to $855.20, while silver slipped on profit-taking, down 4 cents, at $11.18.
Up this week are tech heavyweights - Apple, eBay, Google, AMD, and others - reporting 4Q earnings. Of particular focus is eBay, which seems to have lost a lot of momentum lately, due to CEO John Donahoe's commitment to "disruptive thinking," the idea that eBay must change to grow, or, in his own words, "create a vision of the future so people could let go of a very successful past." Apparently, Mr. Donahoe never heard of IIABDFI (If it Ain't Broke, Don't Fix It) before embarking on changes (like tripling fees in some categories) that have resulted in vociferous complaints and a mass exodus of mid-to-small sellers.
The movement of sellers has been so abrupt that one site, Bonanzle, has gone from zero to just under 1 million listings in about six months time. Other niche and general sites have experienced enormous growth during Donahoe's tenure. Ebay reports after the close on Wednesday. Look for the first of many disappointing quarters. The stock should sink to under $10/per share (currently hovering around $13-14) in short order (no pun, nor hint, intended).
If today's action was any indication, President Obama's task is not going to be an easy nor a pleasing one. Rescuing an economy that has been buffeted by years of abuse and neglect will take time to repair. This is not a condition which will be cured overnight. And, as the President has been reminding us, it's likely to get worse before it gets better. How much worse only time will tell.
The juxtaposition of moods and emotions could not be more stark between the Capitol and the Big Apple. While Obama was reminding us of the nation's greatness, Wall Street was dealing with the current reality of a systemic banking failure. Speaking in Dubai, New York University Professor Nouriel Roubini, who has been one of the leading voices predicting the global financial crisis, said that US banks are "effectively insolvent," adding that total financial losses could reach the staggering sum of $3.6 Trillion.
There is no doubt that the economy will be the stiffest challenge presented to the newly-minted President. Obama, in close contact with the congress, is already working on a financial rescue package which will total over $800 billion in tax breaks and incentives over the next two years. Whether the medicine spooned out by Washington will cure the sick patients of Wall Street is still suspect. The wheels, however, will turn, for better or for worse, and business will continue, in whatever form it takes.
As President Obama made his way to the Capitol to take his oath of office, markets around the world were reeling. The Dow Jones Industrials quickly sank below 8100, the fourth consecutive session in which it has declined beyond that mark. The catalysts for the decline were the same as they have been throughout: the banks and financial institutions that continue to write down massive, unpayable debt, begging for help from stunned legislators while destroying investor confidence and trust in markets.
So it was that the new president was greeted with a massive loss on US equity markets, which ended the session with the worst losses of the new year.
Dow 7,949.09, -332.13 (4.01%)
NASDAQ 1,440.86, -88.47 (5.78%)
S&P 500 805.22. -44.90 (5.28%)
NYSE Composite 5,058.0601, -329.44 (6.11%)
Advancing issues were overwhelmed by decliners, 5655-833, one of the most lopsided showings in months, even though the past few months have been nothing but an endless string of declines in the broad markets. New lows arched ahead of new highs, as expected, 328-18, expanding both the number of new lows and the margin of lows to highs. Volume was once more light, considering the loose selling all around, but, as mentioned in earlier posts, smaller volume figures are more or less going to be a fixture for some time to come. Small investors have been spooked, hedge funds are largely out, and big brokerages (are there any left?) have trimmed their positions significantly.
NYSE Volume 1,718,511,000
NASDAQ Volume 2,014,633,000
On the commodities side, oil, which began a new futures contract today (March), gained from the closing February contract, up $2.23, to $38.74. Gold rebounded sharply, adding $15.30, to $855.20, while silver slipped on profit-taking, down 4 cents, at $11.18.
Up this week are tech heavyweights - Apple, eBay, Google, AMD, and others - reporting 4Q earnings. Of particular focus is eBay, which seems to have lost a lot of momentum lately, due to CEO John Donahoe's commitment to "disruptive thinking," the idea that eBay must change to grow, or, in his own words, "create a vision of the future so people could let go of a very successful past." Apparently, Mr. Donahoe never heard of IIABDFI (If it Ain't Broke, Don't Fix It) before embarking on changes (like tripling fees in some categories) that have resulted in vociferous complaints and a mass exodus of mid-to-small sellers.
The movement of sellers has been so abrupt that one site, Bonanzle, has gone from zero to just under 1 million listings in about six months time. Other niche and general sites have experienced enormous growth during Donahoe's tenure. Ebay reports after the close on Wednesday. Look for the first of many disappointing quarters. The stock should sink to under $10/per share (currently hovering around $13-14) in short order (no pun, nor hint, intended).
If today's action was any indication, President Obama's task is not going to be an easy nor a pleasing one. Rescuing an economy that has been buffeted by years of abuse and neglect will take time to repair. This is not a condition which will be cured overnight. And, as the President has been reminding us, it's likely to get worse before it gets better. How much worse only time will tell.
Oil, Natural Gas Prices Slide
With US equity markets closed in observation of Martin Luther King Jr. Day, there was little to report except on select commodity markets.
In futures trading, oil for February delivery fell $2.84, to $33.67. The February contract closes on Tuesday, Jan. 20, and trading was thin as compared to the March contract.
Also feeling the impact of decreasing demand was natural gas, which is used to heat nearly 1/3 of all US households. The March contract fell 26 cents, to a seasonal low of $4.56.
Both prices reflect supply surpluses in US stocks and slack demand as the economy reels from deflationary pressures, job losses and the nation's worst recession since the 1930s.
Our regular report will be posted shortly after market close, later today, as Americans and the world will be focused on the historic inauguration of President Barack Obama.
In futures trading, oil for February delivery fell $2.84, to $33.67. The February contract closes on Tuesday, Jan. 20, and trading was thin as compared to the March contract.
Also feeling the impact of decreasing demand was natural gas, which is used to heat nearly 1/3 of all US households. The March contract fell 26 cents, to a seasonal low of $4.56.
Both prices reflect supply surpluses in US stocks and slack demand as the economy reels from deflationary pressures, job losses and the nation's worst recession since the 1930s.
Our regular report will be posted shortly after market close, later today, as Americans and the world will be focused on the historic inauguration of President Barack Obama.
Friday, January 16, 2009
Inflation, Deflation and Financial Engineering
Stocks finished he week in fine fashion, ignoring the most obvious bad news: Bank of America needs another $20 billion and needs the Fed or Treasury to backstop even more huge potential losses; Citigroup is breaking up from the pressure of bad debts on its books; industrial production for December fell off another 2%, capacity utilization for the same period fell from 75.2% to 73.6%, and, deflation is alive and well, with the CPI dropping another 0.7% in December.
Noting that those aforementioned figures are supplied by corrupt, inept, spendthrift federal government agencies, the real condition is probably worse, though everybody loves the deflation idea. Everybody, that it, except the government and the Federal Reserve, both of whom are hell-bent on re-inflating the economy. They've been trying hard for months, however, to no avail, throwing money at banks and failing financial institutions, auto manufacturers, insurance companies and anybody else who seems in need of an additional $5 billion or more.
It's not working, and it won't. Here's why. Most of the money spent on bailing out banks and other businesses has been carefully squirreled away to enhance reserves, pay down some debt or other or fund continuing operations. For the money to actually result in inflation it needs to be put to new uses, or loaned, i.e., multiplied. Currently, the banks aren't interested in making new loans to anybody. They've been burned too badly by getting too close to that subprime fire, and now they're worried about other loans going bad, like credit cards, equity lines of credit, commercial real estate loans, to say nothing of the massive amounts (more than $2 trillion) of Alt-A and ARM mortgages due to reset in 2009-10.
The Fed, the government and Treasury, if they had an honest bone between them, would do what really would make the economy zip along: cut the payroll tax, institute usury laws (limiting the maximum interest rate chargeable by law) and let the failing banks (and other companies) be sold off in pieces and have new operators start over.
To get an idea of how one-sided and wrong the government help has been, consider that of the $350 billion already doled out via the TARP, all but $15 billion has gone to banks, financial firms and insurance companies (most of that to AIG). Today, electronics chain Circuit City announced that instead of reorganizing, it would liquidate, in effect, changing its bankruptcy status (filed in November) from Chapter 11 to Chapter 7, or, end of story for the company.
So, while the banks are "too big to fail," what about the 34,000 employees that Circuit City will furlough? And the leases that will not be paid on the huge space that each of the 571 stores it plans to close occupies? Those employees are out of work, the landlords are left with empty space. Too big to fail? Consider that at just an average of $23,000 (just a guess), those 34,000 out-of-work Circuit City employees will cause $782,000,000 in wages to go out of circulation over the course of the year. That's money that will not be spent in local economies, on rent, food, mortgages, utilities, gas, car payments, movie tickets, etc. The ripple effects from those 34,000 people being unemployed may be a lot worse than say, Citigroup going belly up, which, despite mountains of handouts from the feds, it did.
The bailouts are a bad idea made worse by the money going in the wrong places, to the wrong people. It's the working class that needs the money, that greases the wheels of the economy, that keeps America rolling. They've gotten nothing. Well, they'll get unemployment insurance (most of them), again, paid for with taxpayer dollars. If they had been bailed out and kept working, they'd be paying taxes, not draining the treasury.
Still, investors seemingly still believe in the big business that is Wall Street and the stock markets, which are dead, or at least dying. Looking over some charts of the Dow and S&P, in particular, there's a real possibility that stocks could decline much further from current levels. Try to wrap your mind around the Dow at 4000 and the S&P holding tight to a valuation of around 450.
The operative time period seems to be right around 1985, when Reagan tax policies began to take hold and the era of Wall Street greed took off in full flight. On January 2nd, 1985, the Dow opened at 1211.57, the S&P began the year trading at 167.20. At the peak in 2007, the dow was over 14,000, the S&P sailed as high as 1550.
Just a back-of-the-envelope calculation would conclude that the 30 stocks comprising the Dow increased in value over the 22+ years from 1985-2007 by a factor of 11.5. The more modest S&P companies only would have grown 9-fold in the same period. Are these companies worth 11 1/2 and 9 times what they were in 1985? Doubtful. Besides that, many of the losers have been taken out of the indices and replaced with more healthy firms. To get an idea, here are just some of the companies which were part of the Dow in 1985, and are no longer there: American Can, Bethlehem Steel, Eastman Kodak, General Foods, Goodyear, Inco, International Harvester, Owens-Illinois Glass, Sears Roebuck & Company, Westinghouse Electric, Woolworth. The entire index is periodically, carefully re-engineered to reflect a growing economy, when, in fact, companies coming into the index are growing by largely eating the remains of the companies being shown the door. Similar changes occur periodically in the S&P and other indices. It's all part of the Wall Street shell game.
So, even if these companies are worth 3-4 times what they were in 1985, which some may be, they are still, as a group, overvalued. Prior to August, 2007, they were massively overvalued. Today, they are only slightly overvalued, maybe by 35-60%. Still, as the year of 2009 drags onward and profits collapse, valuations will come back to reality.
The financial engineering which began in the Reagan years, took off during the Clinton era, soar and crashed in the Bush years, was a highly profitable venture for the insiders and those who traded smartly. Those still chasing profits today are, as they say, out of luck. The 9000 level on the Dow won't be seen again for another 3-5 years, at the earliest. By June, 8000 will look like a long way up. Stocks need to revert to reasonable, sustainable levels. And they will.
Nonetheless, investors saw to it to boost their fortunes (or bury them in more malinvestments) pumping stocks higher on Friday.
Dow 8,281.22, +68.73 (0.84%)
Nasdaq 1,529.33, +17.49 (1.16%)
S&P 500 850.12, +6.38 (0.76%)
NYSE Composite 5,387.50, +39.75 (0.74%)
On the day, advancers beat declining issues, 4020-2505. New lows were ahead of new highs, 163-20, which was less of a margin than yesterday. With no more trading prior to Inauguration Day (Monday is a holiday), stocks may get a temporary boost for a few days, though the news flows of poor corporate earnings are sure to keep any such Obama-rally brief.
Volume on Friday was the best seen in weeks, most likely tied to options expiry.
NYSE Volume 1,617,226,000
Nasdaq Volume 2,273,921,000
Commodity traders also got on the inflation fantasy train on Friday. Oil futures gained $1.11, to $35.97. Gold skyrocketed $33.60, to $839.90, while silver was also a star, gaining 78 cents, to $11.22. We knew silver was a good buy under $11, but we didn't think the payoff would come so soon. We'll be buying more at any price under $10.80, actually hoping it goes lower, because inflation is, at this juncture, a pipe dream.
Noting that those aforementioned figures are supplied by corrupt, inept, spendthrift federal government agencies, the real condition is probably worse, though everybody loves the deflation idea. Everybody, that it, except the government and the Federal Reserve, both of whom are hell-bent on re-inflating the economy. They've been trying hard for months, however, to no avail, throwing money at banks and failing financial institutions, auto manufacturers, insurance companies and anybody else who seems in need of an additional $5 billion or more.
It's not working, and it won't. Here's why. Most of the money spent on bailing out banks and other businesses has been carefully squirreled away to enhance reserves, pay down some debt or other or fund continuing operations. For the money to actually result in inflation it needs to be put to new uses, or loaned, i.e., multiplied. Currently, the banks aren't interested in making new loans to anybody. They've been burned too badly by getting too close to that subprime fire, and now they're worried about other loans going bad, like credit cards, equity lines of credit, commercial real estate loans, to say nothing of the massive amounts (more than $2 trillion) of Alt-A and ARM mortgages due to reset in 2009-10.
The Fed, the government and Treasury, if they had an honest bone between them, would do what really would make the economy zip along: cut the payroll tax, institute usury laws (limiting the maximum interest rate chargeable by law) and let the failing banks (and other companies) be sold off in pieces and have new operators start over.
To get an idea of how one-sided and wrong the government help has been, consider that of the $350 billion already doled out via the TARP, all but $15 billion has gone to banks, financial firms and insurance companies (most of that to AIG). Today, electronics chain Circuit City announced that instead of reorganizing, it would liquidate, in effect, changing its bankruptcy status (filed in November) from Chapter 11 to Chapter 7, or, end of story for the company.
So, while the banks are "too big to fail," what about the 34,000 employees that Circuit City will furlough? And the leases that will not be paid on the huge space that each of the 571 stores it plans to close occupies? Those employees are out of work, the landlords are left with empty space. Too big to fail? Consider that at just an average of $23,000 (just a guess), those 34,000 out-of-work Circuit City employees will cause $782,000,000 in wages to go out of circulation over the course of the year. That's money that will not be spent in local economies, on rent, food, mortgages, utilities, gas, car payments, movie tickets, etc. The ripple effects from those 34,000 people being unemployed may be a lot worse than say, Citigroup going belly up, which, despite mountains of handouts from the feds, it did.
The bailouts are a bad idea made worse by the money going in the wrong places, to the wrong people. It's the working class that needs the money, that greases the wheels of the economy, that keeps America rolling. They've gotten nothing. Well, they'll get unemployment insurance (most of them), again, paid for with taxpayer dollars. If they had been bailed out and kept working, they'd be paying taxes, not draining the treasury.
Still, investors seemingly still believe in the big business that is Wall Street and the stock markets, which are dead, or at least dying. Looking over some charts of the Dow and S&P, in particular, there's a real possibility that stocks could decline much further from current levels. Try to wrap your mind around the Dow at 4000 and the S&P holding tight to a valuation of around 450.
The operative time period seems to be right around 1985, when Reagan tax policies began to take hold and the era of Wall Street greed took off in full flight. On January 2nd, 1985, the Dow opened at 1211.57, the S&P began the year trading at 167.20. At the peak in 2007, the dow was over 14,000, the S&P sailed as high as 1550.
Just a back-of-the-envelope calculation would conclude that the 30 stocks comprising the Dow increased in value over the 22+ years from 1985-2007 by a factor of 11.5. The more modest S&P companies only would have grown 9-fold in the same period. Are these companies worth 11 1/2 and 9 times what they were in 1985? Doubtful. Besides that, many of the losers have been taken out of the indices and replaced with more healthy firms. To get an idea, here are just some of the companies which were part of the Dow in 1985, and are no longer there: American Can, Bethlehem Steel, Eastman Kodak, General Foods, Goodyear, Inco, International Harvester, Owens-Illinois Glass, Sears Roebuck & Company, Westinghouse Electric, Woolworth. The entire index is periodically, carefully re-engineered to reflect a growing economy, when, in fact, companies coming into the index are growing by largely eating the remains of the companies being shown the door. Similar changes occur periodically in the S&P and other indices. It's all part of the Wall Street shell game.
So, even if these companies are worth 3-4 times what they were in 1985, which some may be, they are still, as a group, overvalued. Prior to August, 2007, they were massively overvalued. Today, they are only slightly overvalued, maybe by 35-60%. Still, as the year of 2009 drags onward and profits collapse, valuations will come back to reality.
The financial engineering which began in the Reagan years, took off during the Clinton era, soar and crashed in the Bush years, was a highly profitable venture for the insiders and those who traded smartly. Those still chasing profits today are, as they say, out of luck. The 9000 level on the Dow won't be seen again for another 3-5 years, at the earliest. By June, 8000 will look like a long way up. Stocks need to revert to reasonable, sustainable levels. And they will.
Nonetheless, investors saw to it to boost their fortunes (or bury them in more malinvestments) pumping stocks higher on Friday.
Dow 8,281.22, +68.73 (0.84%)
Nasdaq 1,529.33, +17.49 (1.16%)
S&P 500 850.12, +6.38 (0.76%)
NYSE Composite 5,387.50, +39.75 (0.74%)
On the day, advancers beat declining issues, 4020-2505. New lows were ahead of new highs, 163-20, which was less of a margin than yesterday. With no more trading prior to Inauguration Day (Monday is a holiday), stocks may get a temporary boost for a few days, though the news flows of poor corporate earnings are sure to keep any such Obama-rally brief.
Volume on Friday was the best seen in weeks, most likely tied to options expiry.
NYSE Volume 1,617,226,000
Nasdaq Volume 2,273,921,000
Commodity traders also got on the inflation fantasy train on Friday. Oil futures gained $1.11, to $35.97. Gold skyrocketed $33.60, to $839.90, while silver was also a star, gaining 78 cents, to $11.22. We knew silver was a good buy under $11, but we didn't think the payoff would come so soon. We'll be buying more at any price under $10.80, actually hoping it goes lower, because inflation is, at this juncture, a pipe dream.
Thursday, January 15, 2009
A Brief Journey Into No-Man's Land
Stocks continued their race to the bottom today, before a combination of short covering, naked optimism and options expiration (tomorrow) brought stocks off their lows of the day to finish with marginal gains, snapping the 6-day losing streak for the Dow, but not before falling through an area of substantial support around 8150 on the Dow and spending much of the day in a no-man's land between the two most recent lows, 7552.29 on November 23 and 8149.09 on December 1 of last year.
Notably, the rally began precisely when the Dow touched down at the 8000 mark, likely due to program trading and internal meddling by government forces. There are still vested interests attempting to fool the public into thinking that recovery is "right around the corner."
Today, not unlike most other recent sessions, saw stocks plummeting at the opening bell. The culprits were the usual combination of bank bailouts, today's headliner being Bank of America (BOA), which is unsurprisingly in need of government money after taking on failed mortgage lender Countrywide and brokerage Merrill Lynch.
December PPI figures confirmed continued price support weakness and first time unemployment claims spiked once more. The usual stuff of a recession/deflation.
Dow 8,212.49, +12.35 (0.15%)
NASDAQ 1,511.84, +22.20 (1.49%)
S&P 500 843.74, +1.12 (0.13%)
NYSE Composite 5,347.75, +19.07 (0.36%)
While the headline numbers would suggest some calm, the exact opposite is what's occurred and will continue to occur until the absolute bottom is once more tested. That testing time is not far off. In fact, today's activity strongly indicates that a major sell off is imminent, within the next two to three weeks.
Advancing issues barely surpassed decliners, 3608-2970, but new lows expanded in both raw number and margin from new highs, 266-23. The trend line of new lows to new highs is clearly indicating severe weakness, though we hardly need internal indicators at this point. One look at any nightly newscast or government report tells us everything about the direction of the market and the mood of investors.
Volume was much higher than normal, due, no doubt to the aforementioned options play and short covering.
NYSE Volume 7,924,407,500
NASDAQ Volume 1,643,737,000
On the other side of the investing coin, commodities took another hit, with oil futures falling to a three-week low, down $1.88, to $34.67 at the close. Gold dropped $1.50, to $807.30. Silver lost 4 cents to $10.44.
Of interest to the many homeowners who heat with natural gas is the recent, continuing drop in the price of that commodity, settling at $4.89 today. The drubbing (a loss of over $1.00 in just the last week) is particularly interesting considering the record cold temperatures recorded this week across a wide swath of the country. Natural gas is still abundant and reserves are high. The wild cards are somewhat intertwined and interrelated: more vacant homes, lower productivity (fewer factories and businesses in operation, lower employment) and conservation by affected dwellers (lower thermostat levels, better insulation).
The low prices for energy are part of the good news. While not everyone is affected equally by the current quagmire, investors and free-spenders are going to be hurt the most. Also, keeping more than a nominal amount of cash in any major bank could result in unexpected inaccessibility of your funds, but that's been obvious for some time, hasn't it?
Notably, the rally began precisely when the Dow touched down at the 8000 mark, likely due to program trading and internal meddling by government forces. There are still vested interests attempting to fool the public into thinking that recovery is "right around the corner."
Today, not unlike most other recent sessions, saw stocks plummeting at the opening bell. The culprits were the usual combination of bank bailouts, today's headliner being Bank of America (BOA), which is unsurprisingly in need of government money after taking on failed mortgage lender Countrywide and brokerage Merrill Lynch.
December PPI figures confirmed continued price support weakness and first time unemployment claims spiked once more. The usual stuff of a recession/deflation.
Dow 8,212.49, +12.35 (0.15%)
NASDAQ 1,511.84, +22.20 (1.49%)
S&P 500 843.74, +1.12 (0.13%)
NYSE Composite 5,347.75, +19.07 (0.36%)
While the headline numbers would suggest some calm, the exact opposite is what's occurred and will continue to occur until the absolute bottom is once more tested. That testing time is not far off. In fact, today's activity strongly indicates that a major sell off is imminent, within the next two to three weeks.
Advancing issues barely surpassed decliners, 3608-2970, but new lows expanded in both raw number and margin from new highs, 266-23. The trend line of new lows to new highs is clearly indicating severe weakness, though we hardly need internal indicators at this point. One look at any nightly newscast or government report tells us everything about the direction of the market and the mood of investors.
Volume was much higher than normal, due, no doubt to the aforementioned options play and short covering.
NYSE Volume 7,924,407,500
NASDAQ Volume 1,643,737,000
On the other side of the investing coin, commodities took another hit, with oil futures falling to a three-week low, down $1.88, to $34.67 at the close. Gold dropped $1.50, to $807.30. Silver lost 4 cents to $10.44.
Of interest to the many homeowners who heat with natural gas is the recent, continuing drop in the price of that commodity, settling at $4.89 today. The drubbing (a loss of over $1.00 in just the last week) is particularly interesting considering the record cold temperatures recorded this week across a wide swath of the country. Natural gas is still abundant and reserves are high. The wild cards are somewhat intertwined and interrelated: more vacant homes, lower productivity (fewer factories and businesses in operation, lower employment) and conservation by affected dwellers (lower thermostat levels, better insulation).
The low prices for energy are part of the good news. While not everyone is affected equally by the current quagmire, investors and free-spenders are going to be hurt the most. Also, keeping more than a nominal amount of cash in any major bank could result in unexpected inaccessibility of your funds, but that's been obvious for some time, hasn't it?
Wednesday, January 14, 2009
It's Official: Economy Stinks; Wall Street is History
If you went to a restaurant for lunch five days a week, but every other time you went there, you either had a bad meal, poor service, the bill was too high or you noticed bugs in the place, how soon would you be looking for other places to eat, bringing your own lunch or skipping the meal altogether?
In many ways, recent experience in the US stock markets has been analogous to the restaurant scenario and many investors are pondering complete withdrawal. Many already have. Some, like fund managers, broker/dealers, traders and the like have no choice; their livelihoods depend on trading. Their ranks, too, have been recently thinned. After today's complete rout, even more will be hitting the streets.
Dow 8,200.14, -248.42 (2.94%)
NASDAQ 1,489.64, -56.82 (3.67%)
S&P 500 842.62, -29.17 (3.35%)
NYSE Composite 5,328.74, -210.10 (3.79%)
Driving the action today were a number of completely expected developments and economic news on retail trade that was absolutely off the chart.
The day began with those retail trade figures that showed December sales slowing by 2.7% from November (remember this was the height of Christmas season) and 9.8% from a year ago. Expect more store closures and retail bankruptcies to follow on soon.
Other news concerned more banking woes - no kidding! - as Deutsche Bank recorded losses of 4.8 billion Euros in the 4th quarter of '08 and British giant HSBC is reportedly in need of a $30 billion cash infusion. Meanwhile, Citigroup is about as dead as a bank can be, having sold off its brokerage unit, Smith Barney, to Morgan Stanley for a paltry amount between $2 and $3 billion. Inasmuch as Morgan Stanley is getting a horde of brokers and a complete trading operation, the price is indicative of just how deep problems in the financial arena are, that adding over a trillion dollars in active accounts is valued so cheaply.
The biggest banks have gone bust. That's now certain. More carnage will follow as the deflationary environment expands, assimilating every aspect of the world's economies.
Each of the Dow's 30 components suffered losses on Wednesday, led by Citigroup, which lost 23%, down 1.37 to 4.53, below the statutory level at which many funds can hold the security. More than half a billion shares of the financial behemoth changed hands during the session.
Falling issues overwhelmed those few rising, 5617-999. New lows expanded even more beyond new highs, 178-15. Volume continues to be subdued.
NYSE Volume 1,417,663,000
NASDAQ Volume 1,948,551,000
The commodity slump continues apace. Oil dropped another 50 cents, to $37.39. Gold hit a 1-month low, losing $11.90, to $808.80. Silver was down 21 cents, to $10.48.
There isn't likely to be a respite from the string of bad news and poor economic reports over the next few days. PPI and CPI are due out Thursday and Friday, and also on Friday, capacity utilization and industrial production figures are released. with only the inauguration of President Barack Obama to break the spell, corporate earnings will garner most of the headlines by the end of next week.
Through the first week of February, earnings will dominate the news and there's a very real chance of stocks breaking down below the November 20 lows. The Dow is within 750 points, other indices are in similar ranges.
Anyone for lunch?
In many ways, recent experience in the US stock markets has been analogous to the restaurant scenario and many investors are pondering complete withdrawal. Many already have. Some, like fund managers, broker/dealers, traders and the like have no choice; their livelihoods depend on trading. Their ranks, too, have been recently thinned. After today's complete rout, even more will be hitting the streets.
Dow 8,200.14, -248.42 (2.94%)
NASDAQ 1,489.64, -56.82 (3.67%)
S&P 500 842.62, -29.17 (3.35%)
NYSE Composite 5,328.74, -210.10 (3.79%)
Driving the action today were a number of completely expected developments and economic news on retail trade that was absolutely off the chart.
The day began with those retail trade figures that showed December sales slowing by 2.7% from November (remember this was the height of Christmas season) and 9.8% from a year ago. Expect more store closures and retail bankruptcies to follow on soon.
Other news concerned more banking woes - no kidding! - as Deutsche Bank recorded losses of 4.8 billion Euros in the 4th quarter of '08 and British giant HSBC is reportedly in need of a $30 billion cash infusion. Meanwhile, Citigroup is about as dead as a bank can be, having sold off its brokerage unit, Smith Barney, to Morgan Stanley for a paltry amount between $2 and $3 billion. Inasmuch as Morgan Stanley is getting a horde of brokers and a complete trading operation, the price is indicative of just how deep problems in the financial arena are, that adding over a trillion dollars in active accounts is valued so cheaply.
The biggest banks have gone bust. That's now certain. More carnage will follow as the deflationary environment expands, assimilating every aspect of the world's economies.
Each of the Dow's 30 components suffered losses on Wednesday, led by Citigroup, which lost 23%, down 1.37 to 4.53, below the statutory level at which many funds can hold the security. More than half a billion shares of the financial behemoth changed hands during the session.
Falling issues overwhelmed those few rising, 5617-999. New lows expanded even more beyond new highs, 178-15. Volume continues to be subdued.
NYSE Volume 1,417,663,000
NASDAQ Volume 1,948,551,000
The commodity slump continues apace. Oil dropped another 50 cents, to $37.39. Gold hit a 1-month low, losing $11.90, to $808.80. Silver was down 21 cents, to $10.48.
There isn't likely to be a respite from the string of bad news and poor economic reports over the next few days. PPI and CPI are due out Thursday and Friday, and also on Friday, capacity utilization and industrial production figures are released. with only the inauguration of President Barack Obama to break the spell, corporate earnings will garner most of the headlines by the end of next week.
Through the first week of February, earnings will dominate the news and there's a very real chance of stocks breaking down below the November 20 lows. The Dow is within 750 points, other indices are in similar ranges.
Anyone for lunch?
Tuesday, January 13, 2009
Balance of Trade Improves; Bernanke on Idiot Tour
Tuesday's split decision (NASDAQ and S&P up; Dow and Comp. down) continued to prove that volatility - along with traders - has departed the scene. Along with the wild swings that typified trading during the height of the crisis (Sept.-Nov.), also gone from the market are (in no particular order): a bunch of banks and financial firms which were losing billions of dollars, trillions of dollars in general, numerous hedge funds, speculators, analysts, traders and a monstrous number of small investors which have fled from pension and retirement funds, 401k's and mutual funds in general.
It's kinda quiet on Wall Street these days, despite the headlines about stimulus, recession, Mad Money, Madoff Money, etc.
The NASDAQ traded in a 30-point range on Tuesday. The Dow's full range, top to bottom, was less than 150 points. Fear has succumbed to complacency, stagnation and apathy. Big money isn't chasing stocks any more. In fact, big money has become smaller and small investors have been removed from the equation. The stock markets have gone from free lunch to eating each other's lunch to no lunch and maybe no dinner either. It's the equivalent of Rosie O'Donnell morphing into Lindsay Lohan (pardon the unappealing mental imagery there).
Dow 8,448.56, -25.41 (0.30%)
NASDAQ 1,546.46, +7.67 (0.50%)
S&P 500 871.79, +1.53 (0.18%)
NYSE Composite 5,538.84, -12.19 (0.22%)
There was a little bit of stunningly good news today that barely received notice. It was that the US Balance of Trade - which has been out of balance for so long that people just expect it to stay that way - actually contracted in November, 2008, to -$40.4 billion.
Owing to the general slowdown in international trade, exports decreased, but so did imports, especially oil (mostly due to price reductions) and goods from China. Overall, the decline in the balance of trade was $16.3 billion from October to November. At that pace, which is likely to be unsustainable, but nice to think about anyway, the US could actually have a positive trade balance by the middle of February. Golly! Maybe this recession isn't such a bad thing after all.
Of course, leave it to Ben Bernanke to throw cold water on rutting hogs. In a speech at the London School of Economics (a place whose students and staff might know a little about economics, so why invite "Helicopter Ben" to speak? - Bernanke offered such nuggets of wisdom as the government and/or the Fed continuing to bail out financial firms with taxpayer money, to the disparagement of the rest of the economy, and having the Fed underwriting everything from student loans and auto loans to credit cards and loans guaranteed by the Small Business Administration.
This is indeed splendid news. The Fed is armed with cash and ready to cover all debts, inflating at will. Ben assured the questioners that the unwinding of the debt incurred by the Fed - obviously some length down the road - will be handled smoothly. Here's hoping that Bernanke's efforts to constrain inflation later on will be better than his panicked attitude on the way down.
For now, however, Ben is hell-bent on reflating the economy, despite the fact that most of the assets which have declined in value - from McMansions to stocks to college degrees - were over-inflated to begin with. Fear not. With people like Ben Bernanke at the helm, our economic ship is sure to continue sinking.
On the markets, advancing issues finished ahead of decliners by a slim margin, 3485-3071. However, new lows continued to expand their edge over new highs, to 118-12, suggesting that the mini-dip we've been in since the beginning of last week is not about to end soon. But, stocks should get a little bit of a boost from the Obama inauguration a week from today, and, being that there are only three trading days before that event (Martin Luther King, Jr. Day is Monday, Jan. 19 and the markets are closed), stocks may avoid falling off the cliff and into the abyss before then.
Volume was once more less than expected, though, as I mentioned yesterday, expectations should be lowered in our new environment.
NYSE Volume 5,623,885,500
NASDAQ Volume 1,965,575,750
Like stocks, commodities were little changed. Oil gained a mere 19 cents, closing at $37.78. Gold dropped 30 cents, to $820.70. Silver dipped 7 cents to $10.68 (buy some!), but the real news was in natural gas futures, which saw the March futures contract on the NYMEX fall to $5.13 per mmbtu., the lowest level in nearly a year. Though it may not be immediately reflected in prices paid by consumers in winter heating bills, the trend is no doubt a friend to anyone who uses natural gas for heat. Energy, including everything from heating oil to gas for cars and trucks, has been the sleeper winner of the recession.
People may lose their jobs and their homes, but at least they aren't likely to freeze to death - at least not in America. we should be happy that our natural gas supply is not under the thumb of the Russians, who have cut delivery through the Ukraine to a host of eastern European nations since last week.
It's kinda quiet on Wall Street these days, despite the headlines about stimulus, recession, Mad Money, Madoff Money, etc.
The NASDAQ traded in a 30-point range on Tuesday. The Dow's full range, top to bottom, was less than 150 points. Fear has succumbed to complacency, stagnation and apathy. Big money isn't chasing stocks any more. In fact, big money has become smaller and small investors have been removed from the equation. The stock markets have gone from free lunch to eating each other's lunch to no lunch and maybe no dinner either. It's the equivalent of Rosie O'Donnell morphing into Lindsay Lohan (pardon the unappealing mental imagery there).
Dow 8,448.56, -25.41 (0.30%)
NASDAQ 1,546.46, +7.67 (0.50%)
S&P 500 871.79, +1.53 (0.18%)
NYSE Composite 5,538.84, -12.19 (0.22%)
There was a little bit of stunningly good news today that barely received notice. It was that the US Balance of Trade - which has been out of balance for so long that people just expect it to stay that way - actually contracted in November, 2008, to -$40.4 billion.
Owing to the general slowdown in international trade, exports decreased, but so did imports, especially oil (mostly due to price reductions) and goods from China. Overall, the decline in the balance of trade was $16.3 billion from October to November. At that pace, which is likely to be unsustainable, but nice to think about anyway, the US could actually have a positive trade balance by the middle of February. Golly! Maybe this recession isn't such a bad thing after all.
Of course, leave it to Ben Bernanke to throw cold water on rutting hogs. In a speech at the London School of Economics (a place whose students and staff might know a little about economics, so why invite "Helicopter Ben" to speak? - Bernanke offered such nuggets of wisdom as the government and/or the Fed continuing to bail out financial firms with taxpayer money, to the disparagement of the rest of the economy, and having the Fed underwriting everything from student loans and auto loans to credit cards and loans guaranteed by the Small Business Administration.
This is indeed splendid news. The Fed is armed with cash and ready to cover all debts, inflating at will. Ben assured the questioners that the unwinding of the debt incurred by the Fed - obviously some length down the road - will be handled smoothly. Here's hoping that Bernanke's efforts to constrain inflation later on will be better than his panicked attitude on the way down.
For now, however, Ben is hell-bent on reflating the economy, despite the fact that most of the assets which have declined in value - from McMansions to stocks to college degrees - were over-inflated to begin with. Fear not. With people like Ben Bernanke at the helm, our economic ship is sure to continue sinking.
On the markets, advancing issues finished ahead of decliners by a slim margin, 3485-3071. However, new lows continued to expand their edge over new highs, to 118-12, suggesting that the mini-dip we've been in since the beginning of last week is not about to end soon. But, stocks should get a little bit of a boost from the Obama inauguration a week from today, and, being that there are only three trading days before that event (Martin Luther King, Jr. Day is Monday, Jan. 19 and the markets are closed), stocks may avoid falling off the cliff and into the abyss before then.
Volume was once more less than expected, though, as I mentioned yesterday, expectations should be lowered in our new environment.
NYSE Volume 5,623,885,500
NASDAQ Volume 1,965,575,750
Like stocks, commodities were little changed. Oil gained a mere 19 cents, closing at $37.78. Gold dropped 30 cents, to $820.70. Silver dipped 7 cents to $10.68 (buy some!), but the real news was in natural gas futures, which saw the March futures contract on the NYMEX fall to $5.13 per mmbtu., the lowest level in nearly a year. Though it may not be immediately reflected in prices paid by consumers in winter heating bills, the trend is no doubt a friend to anyone who uses natural gas for heat. Energy, including everything from heating oil to gas for cars and trucks, has been the sleeper winner of the recession.
People may lose their jobs and their homes, but at least they aren't likely to freeze to death - at least not in America. we should be happy that our natural gas supply is not under the thumb of the Russians, who have cut delivery through the Ukraine to a host of eastern European nations since last week.
Monday, January 12, 2009
Stocks Down Again on Low Volume; Alcoa Losses Mount
Just as last week ended badly for US equity investors, Monday ushered in another round of depressing results.
Another week, another lost dollar. It's just the way it goes when you kill the golden goose, as the financial institutions, regulators and slimy government interlopers killed the Wall Street money machine.
That Wall Street is dead is almost an unmistakable fact. That people haven't noticed should be perhaps of more concern.
The banks - especially Citigroup, JP Morgan Chase, Goldman Sachs and Morgan Stanley (the last two recently having changed their status overnight from investment banks to bank holding companies) - are essentially insolvent. They leveraged their assets so far beyond the pale that US taxpayers have had to pony up cash to salvage what's left of them. Their reserves are maybe 1/50th of their lending, and their balance sheets, when the slime from level 2 and level 3 investments are included, are severely underwater.
Most people in the US and around the world do not understand the massive fraud that is being played out right in front of their eyes. Most of the banks which received TARP funds in the first round (about $350 billion) never lent a penny of the money, but rather used it to bolster their severely-damaged books. Obviously, it wasn't enough, as just today outgoing President Bush sent over a request for the remainder of the money (another $350 billion) to congress. As usual, congress will comply, adding some caveats in hopes that the banks will actually tell somebody, anybody, what they're doing with all that dough.
Don't hold your breath.
Dow 8,473.97, -125.21 (1.46%)
NASDAQ 1,538.79, -32.80 (2.09%)
S&P 500 870.26, -20.09 (2.26%)
NYSE Composite 5,551.03, -151.34 (2.65%
All major indices suffered losses, extending into the 4th straight down day, and the 5th out of 7 in 2009. Decliners led advancers by about 3-1, 5001-1383. New lows were ahead of new highs again, as usual, ad nauseum, 104-15. That gap is expanding, an ominous sign. Volume was pathetic, another signal that all is not well. Not only are investors sitting on the sidelines, many are just plain GONE, vanished, kaput. The level of declines since October have thinned the herd. At least those who have strayed may find greener pastures in foreign, or smaller, local markets. If they're smart, they'll invest in their own local economies instead of playing fat cat with the big boys.
NYSE Volume 1,305,193,000
NASDAQ Volume 1,785,911,000
The lower volume profile thus needs to be understood as a permanent fixture in the new, scorched earth market.
After markets closed, Alcoa (AA) kicked off earnings season by announcing a loss of $1.49 per share for the 4th quarter of 2008. The aluminum giant shed $1.19 billion during the quarter. With this first earnings call in hand, investors are bracing for one of the worst reporting periods on record.
While stocks were winding their way back down - all major indices are down for the year - commodities weren't exactly picking up the slack. Oil plummeted $3.24, to $37.59. Gold slumped $34.00, to $821.00. Silver dipped 57 cents, to $10.75. the ounce. Could be time to begin stocking up on silver bars.
Another week, another lost dollar. It's just the way it goes when you kill the golden goose, as the financial institutions, regulators and slimy government interlopers killed the Wall Street money machine.
That Wall Street is dead is almost an unmistakable fact. That people haven't noticed should be perhaps of more concern.
The banks - especially Citigroup, JP Morgan Chase, Goldman Sachs and Morgan Stanley (the last two recently having changed their status overnight from investment banks to bank holding companies) - are essentially insolvent. They leveraged their assets so far beyond the pale that US taxpayers have had to pony up cash to salvage what's left of them. Their reserves are maybe 1/50th of their lending, and their balance sheets, when the slime from level 2 and level 3 investments are included, are severely underwater.
Most people in the US and around the world do not understand the massive fraud that is being played out right in front of their eyes. Most of the banks which received TARP funds in the first round (about $350 billion) never lent a penny of the money, but rather used it to bolster their severely-damaged books. Obviously, it wasn't enough, as just today outgoing President Bush sent over a request for the remainder of the money (another $350 billion) to congress. As usual, congress will comply, adding some caveats in hopes that the banks will actually tell somebody, anybody, what they're doing with all that dough.
Don't hold your breath.
Dow 8,473.97, -125.21 (1.46%)
NASDAQ 1,538.79, -32.80 (2.09%)
S&P 500 870.26, -20.09 (2.26%)
NYSE Composite 5,551.03, -151.34 (2.65%
All major indices suffered losses, extending into the 4th straight down day, and the 5th out of 7 in 2009. Decliners led advancers by about 3-1, 5001-1383. New lows were ahead of new highs again, as usual, ad nauseum, 104-15. That gap is expanding, an ominous sign. Volume was pathetic, another signal that all is not well. Not only are investors sitting on the sidelines, many are just plain GONE, vanished, kaput. The level of declines since October have thinned the herd. At least those who have strayed may find greener pastures in foreign, or smaller, local markets. If they're smart, they'll invest in their own local economies instead of playing fat cat with the big boys.
NYSE Volume 1,305,193,000
NASDAQ Volume 1,785,911,000
The lower volume profile thus needs to be understood as a permanent fixture in the new, scorched earth market.
After markets closed, Alcoa (AA) kicked off earnings season by announcing a loss of $1.49 per share for the 4th quarter of 2008. The aluminum giant shed $1.19 billion during the quarter. With this first earnings call in hand, investors are bracing for one of the worst reporting periods on record.
While stocks were winding their way back down - all major indices are down for the year - commodities weren't exactly picking up the slack. Oil plummeted $3.24, to $37.59. Gold slumped $34.00, to $821.00. Silver dipped 57 cents, to $10.75. the ounce. Could be time to begin stocking up on silver bars.
Friday, January 9, 2009
It Always Ends Badly
The trouble with suffering through deep recessions is that there's seldom any respite from the continuing flow of bad news, nor is there relief from the severity of the crushing blows delivered daily to the economy and to investors.
This first full week of January provided a little bit of a glimpse of what the rest of the year is going to look like, and it isn't pretty. After going straight up on Friday of last week, the markets went straight down through the week, ending with a loud thud on Friday that sent all the major indices into negative territory for the year. Lest we not forget, the January Barometer - which has proven to be 91% accurate - says, in a nutshell, as goes January, so goes the year. 2009 is not shaping up to be very good at all.
I've actually been quite amused by the number of supposedly "smart" people who are still encouraging people to hold onto their 401k funds, keep them in stocks, "because they always rebound" and other such nonsense. Stocks are sure to bounce off their lows, but they're probably not even close to their absolute bottoms yet. The number of bankruptcies by listed companies in 2009 is going to astound even these "experts," especially the ones who said recovery will begin in the second half of the year.
Anyone currently accumulating either cash, gold, silver or all of the above will be rewarded handsomely at the end of this corrective period, whenever that is... 2010, 2011 or later.
What sank the indices on Friday was no surprise announcement. The Bureau of Labor Statistics, that august group of number massagers, pronounced on Friday morning that the US had shed another 524,000 jobs in December, and that's almost surely off by at least 100,000. The number ADP applied to December job losses on Wednesday was 693,000, and that's more believable, though the stock pushers will gladly take the "official" government number as gospel (or at least that's what they'll tell their clients), being that it's 1/3 smaller than reality.
Dow 8,599.18, -143.28 (1.64%)
NASDAQ 1,571.59, -45.42 (2.81%)
S&P 500 890.35, -19.38 (2.13%)
NYSE Composite 5,703.69, -133.45 (2.29%)
Again, the numbers surely should have surprised exactly nobody, yet the markets responded in the usual pattern of lost hope and near-desperation. They sold in the morning and sold more in the late afternoon.
Declining issues outweighed advancers by a large margin, 4714-1871, though the 5-2 ratio is hardly demonstrative of the market's true weakness. For that, two other readily-available indicators are more poignant: The new highs-new lows ratio and overall volume. New lows outnumbered new highs, 90-30, and while that margin is not great, the persistence of its one-sidedness is remarkable. As for volume, it gets weaker by the day. More and more investors are pulling out of positions and redemptions from funds are still running, at a slower pace than 3 months ago, but that's only because the overall fund balances and holders are smaller.
NYSE Volume 1,158,510,000
NASDAQ Volume 1,946,649,000
Volumes were absolutely pathetic, and they're likely to get even smaller as more players head for the benches. Obviously, those who didn't exit positions on Wednesday, did so on Friday.
Commodities made marginal moves, which is understandable, especially considering the amount of debate over President-elect Obama's thinly-outlined recovery plan, announced Thursday, and rounded beaten up and down since. Oil dropped 93 cents, closing at $40.83. Gold struggled to gain just 50 cents, closing at $855.00, though silver stood apart, gaining 22 cents to finish at $11.32 (lest I remind anyone for the umpteenth time that silver is my #1 pick for 2009).
The coming days and weeks do not bode well for investors of any stripe, unless you're super smart and super short this market. The entire nation is sluggish and on hold until the 20th of January, when the new administration officially takes over. 10 days and counting.
This first full week of January provided a little bit of a glimpse of what the rest of the year is going to look like, and it isn't pretty. After going straight up on Friday of last week, the markets went straight down through the week, ending with a loud thud on Friday that sent all the major indices into negative territory for the year. Lest we not forget, the January Barometer - which has proven to be 91% accurate - says, in a nutshell, as goes January, so goes the year. 2009 is not shaping up to be very good at all.
I've actually been quite amused by the number of supposedly "smart" people who are still encouraging people to hold onto their 401k funds, keep them in stocks, "because they always rebound" and other such nonsense. Stocks are sure to bounce off their lows, but they're probably not even close to their absolute bottoms yet. The number of bankruptcies by listed companies in 2009 is going to astound even these "experts," especially the ones who said recovery will begin in the second half of the year.
Anyone currently accumulating either cash, gold, silver or all of the above will be rewarded handsomely at the end of this corrective period, whenever that is... 2010, 2011 or later.
What sank the indices on Friday was no surprise announcement. The Bureau of Labor Statistics, that august group of number massagers, pronounced on Friday morning that the US had shed another 524,000 jobs in December, and that's almost surely off by at least 100,000. The number ADP applied to December job losses on Wednesday was 693,000, and that's more believable, though the stock pushers will gladly take the "official" government number as gospel (or at least that's what they'll tell their clients), being that it's 1/3 smaller than reality.
Dow 8,599.18, -143.28 (1.64%)
NASDAQ 1,571.59, -45.42 (2.81%)
S&P 500 890.35, -19.38 (2.13%)
NYSE Composite 5,703.69, -133.45 (2.29%)
Again, the numbers surely should have surprised exactly nobody, yet the markets responded in the usual pattern of lost hope and near-desperation. They sold in the morning and sold more in the late afternoon.
Declining issues outweighed advancers by a large margin, 4714-1871, though the 5-2 ratio is hardly demonstrative of the market's true weakness. For that, two other readily-available indicators are more poignant: The new highs-new lows ratio and overall volume. New lows outnumbered new highs, 90-30, and while that margin is not great, the persistence of its one-sidedness is remarkable. As for volume, it gets weaker by the day. More and more investors are pulling out of positions and redemptions from funds are still running, at a slower pace than 3 months ago, but that's only because the overall fund balances and holders are smaller.
NYSE Volume 1,158,510,000
NASDAQ Volume 1,946,649,000
Volumes were absolutely pathetic, and they're likely to get even smaller as more players head for the benches. Obviously, those who didn't exit positions on Wednesday, did so on Friday.
Commodities made marginal moves, which is understandable, especially considering the amount of debate over President-elect Obama's thinly-outlined recovery plan, announced Thursday, and rounded beaten up and down since. Oil dropped 93 cents, closing at $40.83. Gold struggled to gain just 50 cents, closing at $855.00, though silver stood apart, gaining 22 cents to finish at $11.32 (lest I remind anyone for the umpteenth time that silver is my #1 pick for 2009).
The coming days and weeks do not bode well for investors of any stripe, unless you're super smart and super short this market. The entire nation is sluggish and on hold until the 20th of January, when the new administration officially takes over. 10 days and counting.
Thursday, January 8, 2009
Retail Slump, Obama Pump, Pain All Around
Stocks ended the day mixed, amid poor retail results and fear of huge job losses continuing through Spring. The overhanging fear of the government's Friday's Nonfarm Payroll report showing a second consecutive month of more than 500,000 job losses in December was palpable. Nevertheless, stocks rallied off mid-day lows for gains in all indices save the Dow.
Dow 8,742.46, -27.24 (0.31%)
NASDAQ 1,617.01, +17.95 (1.12%)
S&P 500 909.73, +3.08 (0.34%)
NYSE Composite 5,837.14, +38.09 (0.66%)
Retail sales for December were released by a variety of major chains, and the results, fully expected, showed mass declines, despite 50-7-% markdowns throughout the important holiday season. Among the highlights for same-store sales:
Well, as apples go, that's a bunch of bruised, rotting fruit.
Shortly after 11:00 am, President-elect Barack Obama issued a terse pre-inaugural speech on his proposed American Recovery and Reinvestment Plan (ARRP). Obama outlined plans to jump-start four major areas of interest: health care, education, energy and infrastructure. The ideas put forward included retrofitting federal buildings with smart or green-tech energy solutions, providing computers and technology to schools, money for road, bridge and building projects that are shovel-ready and in need of funding and computerization of medical records, to name just a few.
The ARRP also is proposed to include incentives to business, plus a $1000 tax break for "95% of middle class taxpayers." Obama directed his speech primarily to legislators in congress, urging them to put aside partisanship and special interests in favor of "what's good for America." The speech was short - about 15 minutes - and lacking in specifics, though one cannot fault the President-elect on that account, since he is not yet officially our head of state.
Markets, which had recovered from earlier declines, fell back into or further into the red. The Dow, in particular, remained underwater, sinking roughly 100 points by the end of the speech. It is entirely possible that Wall Street may not like what Obama is proposing, because he may actually take on the players, CEOs, regulators, crooks and criminals who caused the economic issues we are currently enduring. If Obama is true to his word, Wall Street firms will be forced to commit to more accountability and scrutiny than has existed for the past 20 years.
If the election of Barack Obama was a truly historic event, then his proposals may prove to be the kind of stimulus which at least limits the pain of the economic downturn and shortens its duration. That's about as much as we can hope for from a new president inheriting a set of economic conditions that are the worst in at least 80 years.
Change is surely in the wind, and Wall Street, already dead, may be setting up for the burial ritual in which financial firms and companies overloaded with debt are quickly dispatched, destroyed in value and liquidated. That is the message coming from Washington. Wall Street and the investment community would be wise to heed the headwinds blowing from the Potomac to the Hudson.
Obama's plan - depending on how badly congress distorts the original intent - is likely to be good for Main Street and ranging from neutral to bad for Wall Street. Tough luck for those who refuse to change, upgrade and grow into the 21st century.
There is still plenty of excess, overhang and waste that has yet to be discounted in the stocks which constitute the major indices, though all indications are that investors will seek more transparency and accountability from publicly-traded firms. The discounting mechanism that is the stock exchange should manage to squeeze out the remaining overvaluations.
On the day, advancing issues outflanked decliners, 4002-2574. New lows remained stubbornly ahead of hew highs, 87-27.
Volume remains light, likely a permanent feature in the new paradigm of the US stock markets until the economy begins to recover, at least. Many participants are sitting on the sidelines or seeking safer havens for their money. The associated rise in the number of bond issuance offers a clue to just how fearful or dissuaded investors have become,
NYSE Volume 1,196,486,000
NASDAQ Volume 2,011,787,000
Commodities were also mixed. Oil dipped 93 cents, to $41.70. Gold gained $12.80 to $854.50. Silver dropped a penny, closing at $11.10.
The upcoming Nonfarms Payroll report, due to be released at 8:30 Friday morning, may have already been discounted on Wednesday, when private payroll firm ADP announced their figure of 693,000 jobs lost in December. Thus, it's a 50-50 proposition on whether stocks will rally or sell-off tomorrow. ADP seems to have taken some of the sting out of the government report. Investor reaction should be more measured than normal.
Dow 8,742.46, -27.24 (0.31%)
NASDAQ 1,617.01, +17.95 (1.12%)
S&P 500 909.73, +3.08 (0.34%)
NYSE Composite 5,837.14, +38.09 (0.66%)
Retail sales for December were released by a variety of major chains, and the results, fully expected, showed mass declines, despite 50-7-% markdowns throughout the important holiday season. Among the highlights for same-store sales:
- Wal-Mart was the only company reporting an increase in same-store sales, +1.2%
- Costco -4%
- Sears -7.3%
- Macy's -4%
- Saks Fifth Avenue -19.8%
- Limited Brands -10%
- Gap -14%
- Abercrombie & Fitch -24%
- Williams-Sonoma -24%
- Dillard's -5%
- Target -4.1%
- Kohl's -1.4%
- JC Penny's -8.1%
Well, as apples go, that's a bunch of bruised, rotting fruit.
Shortly after 11:00 am, President-elect Barack Obama issued a terse pre-inaugural speech on his proposed American Recovery and Reinvestment Plan (ARRP). Obama outlined plans to jump-start four major areas of interest: health care, education, energy and infrastructure. The ideas put forward included retrofitting federal buildings with smart or green-tech energy solutions, providing computers and technology to schools, money for road, bridge and building projects that are shovel-ready and in need of funding and computerization of medical records, to name just a few.
The ARRP also is proposed to include incentives to business, plus a $1000 tax break for "95% of middle class taxpayers." Obama directed his speech primarily to legislators in congress, urging them to put aside partisanship and special interests in favor of "what's good for America." The speech was short - about 15 minutes - and lacking in specifics, though one cannot fault the President-elect on that account, since he is not yet officially our head of state.
Markets, which had recovered from earlier declines, fell back into or further into the red. The Dow, in particular, remained underwater, sinking roughly 100 points by the end of the speech. It is entirely possible that Wall Street may not like what Obama is proposing, because he may actually take on the players, CEOs, regulators, crooks and criminals who caused the economic issues we are currently enduring. If Obama is true to his word, Wall Street firms will be forced to commit to more accountability and scrutiny than has existed for the past 20 years.
If the election of Barack Obama was a truly historic event, then his proposals may prove to be the kind of stimulus which at least limits the pain of the economic downturn and shortens its duration. That's about as much as we can hope for from a new president inheriting a set of economic conditions that are the worst in at least 80 years.
Change is surely in the wind, and Wall Street, already dead, may be setting up for the burial ritual in which financial firms and companies overloaded with debt are quickly dispatched, destroyed in value and liquidated. That is the message coming from Washington. Wall Street and the investment community would be wise to heed the headwinds blowing from the Potomac to the Hudson.
Obama's plan - depending on how badly congress distorts the original intent - is likely to be good for Main Street and ranging from neutral to bad for Wall Street. Tough luck for those who refuse to change, upgrade and grow into the 21st century.
There is still plenty of excess, overhang and waste that has yet to be discounted in the stocks which constitute the major indices, though all indications are that investors will seek more transparency and accountability from publicly-traded firms. The discounting mechanism that is the stock exchange should manage to squeeze out the remaining overvaluations.
On the day, advancing issues outflanked decliners, 4002-2574. New lows remained stubbornly ahead of hew highs, 87-27.
Volume remains light, likely a permanent feature in the new paradigm of the US stock markets until the economy begins to recover, at least. Many participants are sitting on the sidelines or seeking safer havens for their money. The associated rise in the number of bond issuance offers a clue to just how fearful or dissuaded investors have become,
NYSE Volume 1,196,486,000
NASDAQ Volume 2,011,787,000
Commodities were also mixed. Oil dipped 93 cents, to $41.70. Gold gained $12.80 to $854.50. Silver dropped a penny, closing at $11.10.
The upcoming Nonfarms Payroll report, due to be released at 8:30 Friday morning, may have already been discounted on Wednesday, when private payroll firm ADP announced their figure of 693,000 jobs lost in December. Thus, it's a 50-50 proposition on whether stocks will rally or sell-off tomorrow. ADP seems to have taken some of the sting out of the government report. Investor reaction should be more measured than normal.
Wednesday, January 7, 2009
Stocks Slammed on Bleak Employment Numbers
Why investors were surprised at the wickedly bad numbers contained in the ADP National Employment Report [PDF] is a mystery. That they sold off stocks in such a panicky manner is testament to the futility of US equity markets in what eventually will be known as either "The Second Great Depression" or "The Greater Depression" or something even more depressing.
After the US Dept. of Labor recorded over 500,000 job losses for November, and traders fretfully awaited the Non-farm Payroll report on Friday, private firm ADP beat everyone to the punch by a couple of days. It should be noted that ADP's figures are probably more reliable than the overly massaged and managed government numbers since ADP processes 1 out of every 5 private payrolls in the US and they have no vested interest in working the figures one way or the other.
The report, released prior to the opening bell, said the private sector shed some 693,000 jobs in December, a number so large that it defies usual comprehension. It's like putting the entire adult population of a large population center - think Dallas or San Diego - out of work in just a month's time. The devastating loss of jobs, most in the retail and service sector (we've already decimated the goods-producing sector) is the furtherance of the great unwinding and destruction of the US economy.
Looking outward, all those lost jobs will ripple across the global economy, affecting every other nation from Denmark to Thailand to varying degrees. In the long run, nobody is going to be spared from the massive destruction of wealth through stock losses, and declining values in all asset classes.
Dow 8,769.70, -245.40 (2.72%)
NASDAQ 1,599.06, -53.32 (3.23%)
S&P 500 906.65, -28.05 (3.00%)
NYSE Composite 5,799.05, -169.79 (2.84%)
Of course, today's losses are only the beginning. The Dow and fellow major indices have been on something of a rally recently, and, having chalked up a huge gain on Friday, January 2, the first day of trading in 2009, are close to falling into negative territory for the year. The Dow already has, though only by a few points. This sudden reversal of fortune has surely caused some degree of consternation for the few bulls still standing, hoping for "recovery" before we've even hit bottom, but the sea change in sentiment is representative of bear markets, in which markets turn on a dime, or a whim, or, like today, on actual bad news.
As expected, declining issues far out polled advancers, 5071-1566, though that spread isn't even close to what it should be. A 3-1 ratio on a day like today, dominated by bad economic news, a warning from Intel and on the heels of Alcoa's announced layoffs of 13,000, is ridiculously short of expectations. How a quarter of companies can be seen positively is a question only those bidding them up can answer, but it speaks volumes to the lack of understanding of the seriousness of the malaise by market participants. New lows again beat back new highs, 86-18, and, since that trend has yet to be reversed, more declines in the indices - and individual stocks - are to be expected. Volume was not high, but on par with Tuesday, an improvement, though possibly this level is becoming the new normal.
NYSE Volume 1,233,276,000
NASDAQ Volume 2,060,124,000
It wasn't just equities taking a beating. Commodities suffered severe losses, especially oil, which fell $5.95, to $42.63, a 12% drop, on futures exchanges. Gold dropped $24.30, to $841.70, with silver dipping 34 cents, to $11.11. The deflationary environment is taking no prisoners, though the metals are likely to fare better than most asset classes. Incidentally, all food-related futures suffered substantial losses.
It's a good thing that food and fuel are getting cheaper by the minute, as those are just about the only things many people are going to be able to afford for some considerable time. Amazingly, the US economy has yet to reach rock bottom. That could be as long as a year or two away, but for many, including the more than ten million Americans who are already out of work, this winter surely must seem like the worst of times.
It's getting worse, a lot worse, and it's not going to get better any time soon.
After the US Dept. of Labor recorded over 500,000 job losses for November, and traders fretfully awaited the Non-farm Payroll report on Friday, private firm ADP beat everyone to the punch by a couple of days. It should be noted that ADP's figures are probably more reliable than the overly massaged and managed government numbers since ADP processes 1 out of every 5 private payrolls in the US and they have no vested interest in working the figures one way or the other.
The report, released prior to the opening bell, said the private sector shed some 693,000 jobs in December, a number so large that it defies usual comprehension. It's like putting the entire adult population of a large population center - think Dallas or San Diego - out of work in just a month's time. The devastating loss of jobs, most in the retail and service sector (we've already decimated the goods-producing sector) is the furtherance of the great unwinding and destruction of the US economy.
Looking outward, all those lost jobs will ripple across the global economy, affecting every other nation from Denmark to Thailand to varying degrees. In the long run, nobody is going to be spared from the massive destruction of wealth through stock losses, and declining values in all asset classes.
Dow 8,769.70, -245.40 (2.72%)
NASDAQ 1,599.06, -53.32 (3.23%)
S&P 500 906.65, -28.05 (3.00%)
NYSE Composite 5,799.05, -169.79 (2.84%)
Of course, today's losses are only the beginning. The Dow and fellow major indices have been on something of a rally recently, and, having chalked up a huge gain on Friday, January 2, the first day of trading in 2009, are close to falling into negative territory for the year. The Dow already has, though only by a few points. This sudden reversal of fortune has surely caused some degree of consternation for the few bulls still standing, hoping for "recovery" before we've even hit bottom, but the sea change in sentiment is representative of bear markets, in which markets turn on a dime, or a whim, or, like today, on actual bad news.
As expected, declining issues far out polled advancers, 5071-1566, though that spread isn't even close to what it should be. A 3-1 ratio on a day like today, dominated by bad economic news, a warning from Intel and on the heels of Alcoa's announced layoffs of 13,000, is ridiculously short of expectations. How a quarter of companies can be seen positively is a question only those bidding them up can answer, but it speaks volumes to the lack of understanding of the seriousness of the malaise by market participants. New lows again beat back new highs, 86-18, and, since that trend has yet to be reversed, more declines in the indices - and individual stocks - are to be expected. Volume was not high, but on par with Tuesday, an improvement, though possibly this level is becoming the new normal.
NYSE Volume 1,233,276,000
NASDAQ Volume 2,060,124,000
It wasn't just equities taking a beating. Commodities suffered severe losses, especially oil, which fell $5.95, to $42.63, a 12% drop, on futures exchanges. Gold dropped $24.30, to $841.70, with silver dipping 34 cents, to $11.11. The deflationary environment is taking no prisoners, though the metals are likely to fare better than most asset classes. Incidentally, all food-related futures suffered substantial losses.
It's a good thing that food and fuel are getting cheaper by the minute, as those are just about the only things many people are going to be able to afford for some considerable time. Amazingly, the US economy has yet to reach rock bottom. That could be as long as a year or two away, but for many, including the more than ten million Americans who are already out of work, this winter surely must seem like the worst of times.
It's getting worse, a lot worse, and it's not going to get better any time soon.
Tuesday, January 6, 2009
Wall Street: DEAD AS A DOORNAIL
Economic reports dominated the headlines on Tuesday, where weakness in manufacturing, an all-time low in pending home sales and a release of the Fed's December meeting minutes were offset by a better-than-expected ISM Services reading for December of 40.6, up from 37.3 a month ago.
Preliminary figures provided by the US Census Bureau on manufacturers' shipments, inventories and orders was unsurprising but sobering. Following a 6% decline in October, new orders fell 4.6% in November, the 4th consecutive month of declines. Further, the inventories-to-shipments ratio rose again, from 1.33 to 1.41. Inventories are piling up on producers' shelves and in stores as the holiday season failed to produce a break in the negative trend in spending.
The Fed minutes (linked above) from the December meeting were released at 2:00 in the afternoon, just in time to rally the markets, though one would be hard-pressed to produce any positive spin, save that the Fed was prepared to expand its own balance sheet and make hefty open-market purchases of a wide range of mortgage and agency debt. While those purchases might alleviate some strain on stressed-out bankers, it only prolongs the drag on the economy until such a time that it becomes impossible to contain the downward price pressures of outright deflation.
Those minutes are an interesting read, if only to characterize the FOMC and the entire Federal Reserve as a roomful of fat, impotent old men in suits who think the economy can be maneuvered in whichever way they like through monetary policy. It's also useful in realizing that the Fed is essentially hell-bent on inflation as a major tool for their stated dual goals of full employment and price stability. The unfortunate reality for the fools of the Fed is that Keynesian economics never advocated outright inflation (or money creation out of thin air) as a tool for price stability. Proponents of the Austrian school of economics, in which no intervention is the preferred model, is probably going to have the last laugh when this episode of economic and moral turpitude has run its fatal course.
With the uneven news came an unsteady market, which opened higher, collapsed just after 10:00 am and staged a late-session recovery, with the major indices finishing moderately higher.
Dow 9,015.10, +62.21 (0.69%)
NASDAQ 1,652.38, +24.35 (1.50%)
S&P 500 934.70, +7.25 (0.78%)
NYSE Composite 5,968.84, +60.41 (1.02%)
The good news is that better volume has finally returned as volatility continues to decline. The entire day's range for the Dow was a mere 148 points. More good news came from the internal data showing advancers far ahead of declining issues, 5010-1661. New lows remained stubbornly ahead of new highs, 94-40.
NYSE Volume 1,334,630,000
NASDAQ Volume 2,179,892,000
As for direction, there are dithering indicators. The new high-new low metric refuses to break and stocks seem to be stuck at resistance in the 9000-9100 level on the Dow. There will need to be a significant catalyst to break through said resistance, and the December Non-farm Payroll report, due on Friday prior to the opening bell, isn't likely to produce anything approaching good news. Therefore, the emphasis must be on safety and risk aversion, as the market now seems poised for either a rally continuation or a sharp reversal. Something is going to give, and soon.
There seems to be a little more of an appetite for stocks, now that the average investor has lost a bundle and now sees equities as just about the only way out. It's a natural occurrence, as the old saying, time heals all wounds works equally well for investments as for romances. With stocks staging a slow recovery, investors may well be licking their chops over what seem to be enticing valuations.
Surely, stocks are cheap, but they are that way for a variety of reasons. As mentioned in previous posts, the rationale to steer clear of stocks at this juncture consists of interlinking parts: 4th quarter numbers are likely to be poor and will be reported - for the majority of companies - within weeks; the US and global economy are in the midst of the worst setback since WWII and recovery will be slow; government attempts to reinvigorate the economy have failed and have been costly; nothing has been done to affect the hundreds of thousands of people losing their homes and/or jobs, and whatever will be done will likely not be enough to offset the prevailing headwinds of slack demand and price deflation.
So, go ahead and jump in at your pleasure, but don't tell anyone you heard that advice here. I have been completely out of buy side positions since September, 2007, and continue to advise against stocks. Cash is the very best friend you've ever had right now. Real bargains have not yet begun to appear and won't until the housing market bottoms out and then stabilizes. That pair of events is still a good 12-18 months away.
I am so negative on stocks that I'm considering not even reporting on them any more as we move further toward a cash-based - as opposed to credit-based - economy. Distortions, disruptions and price permutations are going to be all over the map for the next two years in everything from car prices to used comic books. Value investors will have a field day buying distressed assets at rock-bottom prices.
Wall Street committed suicide by holding their own toxic blend of mortgage-backed securities (MBS) and structured investment vehicles (SIV) and is thus DEAD AS A DOORNAIL. The major banks are insolvent (as is the US government), lending is still occurring at a snail's pace and capital formation has been nearly entirely wiped out. 2009 will be remembered as the year in which globalization failed completely and all of the excesses of the past 20 years began to unwind in recognizable ways. Real job growth will not take place until at least October of this year, though probably later than that. There's nothing the government can do to prevent the unwinding, which is necessary and real, though they will spend $$$ trillions trying to stem the inevitable tide of foreclosures, liquidations, defaults and bankruptcies which must occur in order to restore function to both the financial and societal structure.
On the day, commodity prices see-sawed to a mixed close. Oil ended down slightly, by 23 cents, to $48.58. Precious metals reversed earlier selling to finish the day with gains. Gold was up $8.20, to $866.00, while silver added 18 cents, to $11.45.
At 5:00 pm, an hour after the close, Alcoa (AA) announced plans to slash 13,500 jobs and 1700 contractors in a cost savings measure.
Preliminary figures provided by the US Census Bureau on manufacturers' shipments, inventories and orders was unsurprising but sobering. Following a 6% decline in October, new orders fell 4.6% in November, the 4th consecutive month of declines. Further, the inventories-to-shipments ratio rose again, from 1.33 to 1.41. Inventories are piling up on producers' shelves and in stores as the holiday season failed to produce a break in the negative trend in spending.
The Fed minutes (linked above) from the December meeting were released at 2:00 in the afternoon, just in time to rally the markets, though one would be hard-pressed to produce any positive spin, save that the Fed was prepared to expand its own balance sheet and make hefty open-market purchases of a wide range of mortgage and agency debt. While those purchases might alleviate some strain on stressed-out bankers, it only prolongs the drag on the economy until such a time that it becomes impossible to contain the downward price pressures of outright deflation.
Those minutes are an interesting read, if only to characterize the FOMC and the entire Federal Reserve as a roomful of fat, impotent old men in suits who think the economy can be maneuvered in whichever way they like through monetary policy. It's also useful in realizing that the Fed is essentially hell-bent on inflation as a major tool for their stated dual goals of full employment and price stability. The unfortunate reality for the fools of the Fed is that Keynesian economics never advocated outright inflation (or money creation out of thin air) as a tool for price stability. Proponents of the Austrian school of economics, in which no intervention is the preferred model, is probably going to have the last laugh when this episode of economic and moral turpitude has run its fatal course.
With the uneven news came an unsteady market, which opened higher, collapsed just after 10:00 am and staged a late-session recovery, with the major indices finishing moderately higher.
Dow 9,015.10, +62.21 (0.69%)
NASDAQ 1,652.38, +24.35 (1.50%)
S&P 500 934.70, +7.25 (0.78%)
NYSE Composite 5,968.84, +60.41 (1.02%)
The good news is that better volume has finally returned as volatility continues to decline. The entire day's range for the Dow was a mere 148 points. More good news came from the internal data showing advancers far ahead of declining issues, 5010-1661. New lows remained stubbornly ahead of new highs, 94-40.
NYSE Volume 1,334,630,000
NASDAQ Volume 2,179,892,000
As for direction, there are dithering indicators. The new high-new low metric refuses to break and stocks seem to be stuck at resistance in the 9000-9100 level on the Dow. There will need to be a significant catalyst to break through said resistance, and the December Non-farm Payroll report, due on Friday prior to the opening bell, isn't likely to produce anything approaching good news. Therefore, the emphasis must be on safety and risk aversion, as the market now seems poised for either a rally continuation or a sharp reversal. Something is going to give, and soon.
There seems to be a little more of an appetite for stocks, now that the average investor has lost a bundle and now sees equities as just about the only way out. It's a natural occurrence, as the old saying, time heals all wounds works equally well for investments as for romances. With stocks staging a slow recovery, investors may well be licking their chops over what seem to be enticing valuations.
Surely, stocks are cheap, but they are that way for a variety of reasons. As mentioned in previous posts, the rationale to steer clear of stocks at this juncture consists of interlinking parts: 4th quarter numbers are likely to be poor and will be reported - for the majority of companies - within weeks; the US and global economy are in the midst of the worst setback since WWII and recovery will be slow; government attempts to reinvigorate the economy have failed and have been costly; nothing has been done to affect the hundreds of thousands of people losing their homes and/or jobs, and whatever will be done will likely not be enough to offset the prevailing headwinds of slack demand and price deflation.
So, go ahead and jump in at your pleasure, but don't tell anyone you heard that advice here. I have been completely out of buy side positions since September, 2007, and continue to advise against stocks. Cash is the very best friend you've ever had right now. Real bargains have not yet begun to appear and won't until the housing market bottoms out and then stabilizes. That pair of events is still a good 12-18 months away.
I am so negative on stocks that I'm considering not even reporting on them any more as we move further toward a cash-based - as opposed to credit-based - economy. Distortions, disruptions and price permutations are going to be all over the map for the next two years in everything from car prices to used comic books. Value investors will have a field day buying distressed assets at rock-bottom prices.
Wall Street committed suicide by holding their own toxic blend of mortgage-backed securities (MBS) and structured investment vehicles (SIV) and is thus DEAD AS A DOORNAIL. The major banks are insolvent (as is the US government), lending is still occurring at a snail's pace and capital formation has been nearly entirely wiped out. 2009 will be remembered as the year in which globalization failed completely and all of the excesses of the past 20 years began to unwind in recognizable ways. Real job growth will not take place until at least October of this year, though probably later than that. There's nothing the government can do to prevent the unwinding, which is necessary and real, though they will spend $$$ trillions trying to stem the inevitable tide of foreclosures, liquidations, defaults and bankruptcies which must occur in order to restore function to both the financial and societal structure.
On the day, commodity prices see-sawed to a mixed close. Oil ended down slightly, by 23 cents, to $48.58. Precious metals reversed earlier selling to finish the day with gains. Gold was up $8.20, to $866.00, while silver added 18 cents, to $11.45.
At 5:00 pm, an hour after the close, Alcoa (AA) announced plans to slash 13,500 jobs and 1700 contractors in a cost savings measure.
Monday, January 5, 2009
Stocks Sag in Sluggish Session
It was back to business as usual for the first trading day of the first full week of 2009, meaning that investors went about the business of shedding losers and making incremental bets on safety stocks. Speculation has just about been wrung out of the market along with the wicked volatility that marked trading in the 4th quarter of 2008. In fact, the Dow Jones Industrials, in which 300-500 point daily swings had become commonplace, has only had one day, has only had one 300-point swing - from the low to the high of the day - in its last eight sessions.
Traders have grown weary of the relentless selling pressure, while many are surely sitting out until close to Inauguration Day (Jan. 20) which neatly coincides with the kickoff of 4th quarter earnings season. The duopoly of events should make for some interesting developments nearing the end of the month. For now, however, the major indices are holding onto pretty good gains for '09, garnered on Friday's New Year rally.
Dow 8,952.89, -81.80 (0.91%)
NASDAQ 1,628.03, -4.18 (0.26%)
S&P 500 927.45, -4.35 (0.47%)
NYSE Composite 5,908.43, -7.30 (0.12%)
Monday's losses finished off a three-day winning streak for the major indices, though advancing issues outdid decliners by a wide margin, 4016-2655. New lows continued their domineering streak over new highs, though the margin narrowed once more, to 68-40, in favor of the lows.
Volume was again modest, if not downright depressing. There is a notable lack of enthusiasm, due, no doubt to the vicious beating investors took in 2008. There needs to be more clarity from Washington as well as Wall Street for investors to regain a modicum of confidence that stocks are still good investments. The Dow spent all day underwater, while the other averages only briefly posted positive numbers.
NYSE Volume 1,322,749,000
NASDAQ Volume 1,800,739,000
Commodities were all over the place. Oil gained $2.47, to close at $48.81. Gold slipped $21.70, to $857.80, while silver fell 22 cents, to $11.27. Natural gas futures for March remain stubbornly above their seasonal norm, today gaining 9 cents to close at $6.09. Potential disruptions in Eastern Europe and an unusually cold December have contributed to higher prices for the commodity by which nearly 2/3rds of American homes are heated.
As the world awaits the official taking of power by President-elect Barack Obama, there is a palpably tense mood overwhelming the nation, if not the world. It is as though we are holding our collective breaths - especially with the ongoing violence in Gaza - until we can exhale when we officially appoint a new leader. Until then, the market should only take baby steps, unless there is some remarkable news or event to disrupt the anxiety.
Traders have grown weary of the relentless selling pressure, while many are surely sitting out until close to Inauguration Day (Jan. 20) which neatly coincides with the kickoff of 4th quarter earnings season. The duopoly of events should make for some interesting developments nearing the end of the month. For now, however, the major indices are holding onto pretty good gains for '09, garnered on Friday's New Year rally.
Dow 8,952.89, -81.80 (0.91%)
NASDAQ 1,628.03, -4.18 (0.26%)
S&P 500 927.45, -4.35 (0.47%)
NYSE Composite 5,908.43, -7.30 (0.12%)
Monday's losses finished off a three-day winning streak for the major indices, though advancing issues outdid decliners by a wide margin, 4016-2655. New lows continued their domineering streak over new highs, though the margin narrowed once more, to 68-40, in favor of the lows.
Volume was again modest, if not downright depressing. There is a notable lack of enthusiasm, due, no doubt to the vicious beating investors took in 2008. There needs to be more clarity from Washington as well as Wall Street for investors to regain a modicum of confidence that stocks are still good investments. The Dow spent all day underwater, while the other averages only briefly posted positive numbers.
NYSE Volume 1,322,749,000
NASDAQ Volume 1,800,739,000
Commodities were all over the place. Oil gained $2.47, to close at $48.81. Gold slipped $21.70, to $857.80, while silver fell 22 cents, to $11.27. Natural gas futures for March remain stubbornly above their seasonal norm, today gaining 9 cents to close at $6.09. Potential disruptions in Eastern Europe and an unusually cold December have contributed to higher prices for the commodity by which nearly 2/3rds of American homes are heated.
As the world awaits the official taking of power by President-elect Barack Obama, there is a palpably tense mood overwhelming the nation, if not the world. It is as though we are holding our collective breaths - especially with the ongoing violence in Gaza - until we can exhale when we officially appoint a new leader. Until then, the market should only take baby steps, unless there is some remarkable news or event to disrupt the anxiety.
Friday, January 2, 2009
Optimistic Investors Push Dow Past 9000
It's a new year, so let's all buy the stocks we sold for losses in 2008.
That seemed to be the prevailing mentality as Wall Street staged its third consecutive rally in a row, starting 2009 off with a veritable bang.
Of course, this kind of optimism is exactly what bears like, even more than bulls. The January Effect seems to be in full flower, with investors jumping in with abandon. Apparently, there's still far too many plungers out there willing to take risks on stocks - even following the worst year on Wall Street since the 1930s - for a realistic bottom to form.
That a real, enduring bottom will form at some later date is almost assured, unless President Obama turns out to be a miracle worker instead of a politician. His administration begins in just 18 days, and investors are encouraged that a change of parties and policies will produce prosperity.
While stocks scrambled up the charts on Friday, economic news was less-than-reassuring. The Institute for Supply Management (ISM) Manufacturing Index, a key measure of manufacturing strength or weakness, tumbled to 32.4% in December, following a reading of 36.2% in November. It was the lowest reading for this particular report since June 1980. The report included some nuggets of just how weak the manufacturing sector really is, including this:
Despite that sobering bit of news, investors were undeterred from staking out positions.
Dow 9,034.69, +258.30 (2.94%)
NASDAQ 1,632.21, +55.18 (3.50%)
S&P 500 931.80, +28.55 (3.16%)
NYSE Composite 5,915.73, +158.68 (2.76%)
Another indication that the recent rally is unsustainable is the relatively low volume, which, for the past three sessions, including today's, were more in line with mid-Summer doldrums rather than an expanding market condition.
NYSE Volume 4,075,754,500
NASDAQ Volume 1,464,044,875
Advancing issues leaped ahead of decliners, 5084-1415. New lows outnumbered new highs, but by a very slim margin, 54-20. This indicates that the market is either headed for a long reversal rally or that this 3-day event is just about over. New highs have only surpassed new lows 4 or 5 times (on a day-to-day basis) in the last 14 months.
Commodities were mixed. Oil gained $1.74 per barrel, to $46.34. Gold lost $4.80, to $879.50. Silver gained 20 cents to $11.49.
It was a welcome relief rally for investors, who want to at least believe that the market cannot go down any more.
Did somebody say, "sucker rally?" We'll see in days and weeks ahead. Earnings for the 4th quarter will begin to flow to the street in three weeks and they're predicted to be short of expectations in a variety of industries, not the least of which will be retail.
It will be interesting to note the January Barometer, which is a highly accurate predictive tool based on the premise that whatever direction the S&P 500 ends the month is the direction for stocks the rest of the year.
The January Barometer was a highly useful predictor last year, when the S&P lost 90 points in January, presaging a 2008 total loss of 465 points.
That seemed to be the prevailing mentality as Wall Street staged its third consecutive rally in a row, starting 2009 off with a veritable bang.
Of course, this kind of optimism is exactly what bears like, even more than bulls. The January Effect seems to be in full flower, with investors jumping in with abandon. Apparently, there's still far too many plungers out there willing to take risks on stocks - even following the worst year on Wall Street since the 1930s - for a realistic bottom to form.
That a real, enduring bottom will form at some later date is almost assured, unless President Obama turns out to be a miracle worker instead of a politician. His administration begins in just 18 days, and investors are encouraged that a change of parties and policies will produce prosperity.
While stocks scrambled up the charts on Friday, economic news was less-than-reassuring. The Institute for Supply Management (ISM) Manufacturing Index, a key measure of manufacturing strength or weakness, tumbled to 32.4% in December, following a reading of 36.2% in November. It was the lowest reading for this particular report since June 1980. The report included some nuggets of just how weak the manufacturing sector really is, including this:
"New orders have contracted for 13 consecutive months, and are at the lowest level on record going back to January 1948. Order backlogs have fallen to the lowest level since ISM began tracking the Backlog of Orders Index in January 1993. Manufacturers are reducing inventories and shutting down capacity to offset the slower rate of activity."
Despite that sobering bit of news, investors were undeterred from staking out positions.
Dow 9,034.69, +258.30 (2.94%)
NASDAQ 1,632.21, +55.18 (3.50%)
S&P 500 931.80, +28.55 (3.16%)
NYSE Composite 5,915.73, +158.68 (2.76%)
Another indication that the recent rally is unsustainable is the relatively low volume, which, for the past three sessions, including today's, were more in line with mid-Summer doldrums rather than an expanding market condition.
NYSE Volume 4,075,754,500
NASDAQ Volume 1,464,044,875
Advancing issues leaped ahead of decliners, 5084-1415. New lows outnumbered new highs, but by a very slim margin, 54-20. This indicates that the market is either headed for a long reversal rally or that this 3-day event is just about over. New highs have only surpassed new lows 4 or 5 times (on a day-to-day basis) in the last 14 months.
Commodities were mixed. Oil gained $1.74 per barrel, to $46.34. Gold lost $4.80, to $879.50. Silver gained 20 cents to $11.49.
It was a welcome relief rally for investors, who want to at least believe that the market cannot go down any more.
Did somebody say, "sucker rally?" We'll see in days and weeks ahead. Earnings for the 4th quarter will begin to flow to the street in three weeks and they're predicted to be short of expectations in a variety of industries, not the least of which will be retail.
It will be interesting to note the January Barometer, which is a highly accurate predictive tool based on the premise that whatever direction the S&P 500 ends the month is the direction for stocks the rest of the year.
The January Barometer was a highly useful predictor last year, when the S&P lost 90 points in January, presaging a 2008 total loss of 465 points.
Subscribe to:
Posts (Atom)
Posts
