Prior to the market's open, the Commerce Dept. reported that GDP for the 4th quarter of 2008 declined by 6.2%, much more than the previous estimate of -3.8%, and more than the consensus estimate of -5.2%. Word was also spreading fast that the federal government was about to take a 36% stake in troubled Citigroup, more than quadrupling taxpayer's stake in the bank.
Right out of the gate, stocks tanked, with the Dow down nearly 150 points within the first 15 minutes. After trading in a tight range through most of the day, the markets finally succumbed to the intensely negative pressure in the final hour, sending the Dow, S&P and NYSE Comp. to new lows, surpassing those made earlier this week. As I said in yesterday's headline: GAME OVER!
Dow 7,062.93, -119.15 (1.66%)
NASDAQ 1,377.84, -13.63 (0.98%)
S&P 500 735.09, -17.74 (2.36%)
NYSE Composite 4,617.05, -95.97 (2.04%)
According to this report by Lauren Tara LaCapra, citing credit analysis by Egan Jones, a proprietary firm, Bank of America should be up next to follow Citigroup to the government hand-out window.
Hasn't it become evidently clear to Tim Geithner at Treasury that his plan for submitting the banks to a "stress test" won't even come close to relieving the stress to the credit and finance system?
First, the executives, Citi's Vikram Pandit and BofA's Ken Lewis, haven't come clean as to what's lurking on (and off - as in tier three) their books, awaiting implosion. Second, the government's benchmarks in the stress tests are simply too optimistic. For instance, the GDP worst case component calls for GDP to fall by 3.3% in 2009 and grow by 0.5% in 2010. We're looking today at a fourth quarter of 2008 in which GDP declined by 6.2%, according to the government's own report, issued today, so shouldn't the worst case be closer to a 5.0% decline in GDP for 2009 and a flat year in 2010?
As far as wost cases are concerned, a drop of 5.0% isn't even that bad. It is entirely possible that GDP could collapse by as much as 8 or 9% in the first two quarters of 2009 and get worse from there. The government simply doesn't want to face reality, believing, amazingly, after all we've been through, that the system is still resilient. It's not. The major banks are broken and the government is not only complicit through non-regulation, but now looking wholly incompetent, decrepit and corrupted to its core.
So, when the government finally gets the memo, they should have the FDIC close down Citi, zero out the shareholders, pay off bondholders at pennies on the dollar, recapitalize what's left and sell it off - in parts, if necessary - to private hands - shareholders, regional banks or private investors. Then, rinse, and repeat with Wells Fargo & Company (WFC) and JP Morgan Chase (JPM). anything short of a complete shutdown of the banking behemoths will only serve to prolong the agony in the credit, bond and stock markets, severely crimp lending and prolong the recession, turning it into a depression.
The Obama administration and Geithner's Treasury Dept. must take off the kid gloves, stop treating the banks as sacred cows and deal with the colossal problems facing the nation.
One of the reasons the economy is in such a staggering decline, is how lucrative not working has become. A woman caller to the Rush Limbaugh radio show today said she recieved $459 per week in unemployment insurance benefits and the government has just added an additional $25 per week, courtesy of the stimulus bill. That equates to $25,000 per year for not working. There clearly needs to be more incentive to find work, as being on the dole has now become better than the wages of 30-40% working Americans.
Elsewhere, General Electric (GE), slashed its annual dividend, from 32 cents to 10.
Market internals confirmed the headline numbers. Declining issues ran ahead of advancing ones, 4131-1390. New lows overwhelmed new highs, 815-7. Not a single NASDAQ issue made a new 52-week high on the day. The daily advantage for new lows over new highs has now run a full 16 months, since October, 2007. Volume was the highest of the week, in a week which was probably the highest it has been all year.
NYSE Volume 2,248,907,000
NASDAQ Volume 2,457,442,000
Commodities were quiet. Oil lost 46 cents, to $44.76. Gold lost a dime, to $942.50, while silver gained 13 cents to $13.11.
The major indices closed lower for the week, for the 7th time in 8 weeks in 2009.
In closing, I want to take this opportunity to lay claim to the coinage of a new socio-economic terminology, by announcing the advent of the Post-Government Era, a spawning global movement of rampant avoidance and non-compliance of the various laws, taxes and decrees of governments around the world. As the myriad levels of government lay deeper and deeper burdens upon the populace in the large majority of industrial nations, people will naturally revolt, and that revolutionary fervor finds its roots in non-compliance, civil disobedience and outright rejection of authority.
It's deserving of the current rostrum of national governments to receive treatment of this sort, as they have, individually and as a group, compounded the problems of the people, overtaxed them to extraordinary levels and continues to treat them as worthless fodder. The Post-Government Era has begun.
You heard it here first.
Friday, February 27, 2009
Thursday, February 26, 2009
Game Over! Stocks Swoon on Stress Test Suspicion
Stocks opened higher despite more sour economic news, but ended the day in the red as the reality that Treasury's "stress test" for the ailing banking sector was more smoke, mirrors, politics and PR than an actual remedy.
Secretary Tim Geithner's "plan" to resolve the banking and financial crisis has good probability to extend the recession by not addressing the core problems. (See earlier post below for details on Treasury's plan.)
Blow by blow, here's how the day went, as interpreted by Wall Street's desperate price discovery process (at least somebody's working).
8:30 am: The Commerce Dept. issues monthly Durable Goods Orders report for January, citing a deep decline of 5.2% from the previous month, the sixth straight monthly drop. It's evident that Americans have their wallets and purses closed tight. Some even have forsaken carrying such.
The Labor Dept. announces 667,000 new weekly unemployment claims nationally. The 5.1 million currently receiving benefits is the highest since the department began keeping records in 1967. The federal government celebrated the occasion by adding $25 to the weekly benefit. Each week, an additional $127,500,000 of taxpayer money will be spent, beginning immediately.
9:30 am: The markets open with sharp gains, ignoring the dire economic reports. The Dow is up 80 points in the first ten minutes. the other major indices are up more than 1%. Bank of America is up 0.69 at 5.85.
10:45 am: The Dow reaches what will eventually be the high of the day - 7400 - up 130 points. 26 of 30 Dow stocks show gains. Bank of America peaks at 5.89, up 0.73.
1:13 pm: Having given up all of the day's gains, the Dow briefly falls into negative territory. Bank of America is up only 0.24 at 5.40.
3:15 pm: Stocks are in full retreat, with the Dow lower by 97 points. Bank of America is down 0.05 at 5.11. There are now only nine Dow components with gains. Most have completely rolled over.
4:00 pm: Markets close with all indices near the day's lows. It's the 8th losing day in the last 10. The Dow closes below 7200 for the second time this week. 22 Dow components close with losses, 8 with gains. Bank of America finishes with a cheerless win of 0.16, at 5.32.
Dow 7,182.08, -88.81 (1.22%)
NASDAQ 1,391.47, -33.96 (2.38%)
S&P 500 752.83, -12.07 (1.58%)
NYSE Composite 4,713.02, -40.15 (0.84%)
Market internals verified the session's finish. Declining issues outgunned advancers, 3755-2761. New lows: 460; new highs: 4, the lowest number of new highs I have seen since October of 2007. Volume was high once again, as investors alternately test and flee from equities.
NYSE Volume 1,482,993,000
NASDAQ Volume 2,348,150,000
Commodities were split. Crude oil for April delivery was up $2.72 to an unsustainable $45.22. Gold continued to correct on profit-taking, losing $23.60, to $942.60. Silver tumbled 94 cents, to $12.98, an excellent buying opportunity for long term investors.
Today's results were startling, stunning, unprecedented in the level of pessimism on display, expressing a remarkable distrust of government and overwhelming lack of confidence in the economic future. There is little doubt among investors that the government has failed to offer reasonable solutions to stem bank losses, job losses, income deterioration and revive - or even stabilize - the economy.
Secretary Tim Geithner's "plan" to resolve the banking and financial crisis has good probability to extend the recession by not addressing the core problems. (See earlier post below for details on Treasury's plan.)
Blow by blow, here's how the day went, as interpreted by Wall Street's desperate price discovery process (at least somebody's working).
8:30 am: The Commerce Dept. issues monthly Durable Goods Orders report for January, citing a deep decline of 5.2% from the previous month, the sixth straight monthly drop. It's evident that Americans have their wallets and purses closed tight. Some even have forsaken carrying such.
The Labor Dept. announces 667,000 new weekly unemployment claims nationally. The 5.1 million currently receiving benefits is the highest since the department began keeping records in 1967. The federal government celebrated the occasion by adding $25 to the weekly benefit. Each week, an additional $127,500,000 of taxpayer money will be spent, beginning immediately.
9:30 am: The markets open with sharp gains, ignoring the dire economic reports. The Dow is up 80 points in the first ten minutes. the other major indices are up more than 1%. Bank of America is up 0.69 at 5.85.
10:45 am: The Dow reaches what will eventually be the high of the day - 7400 - up 130 points. 26 of 30 Dow stocks show gains. Bank of America peaks at 5.89, up 0.73.
1:13 pm: Having given up all of the day's gains, the Dow briefly falls into negative territory. Bank of America is up only 0.24 at 5.40.
3:15 pm: Stocks are in full retreat, with the Dow lower by 97 points. Bank of America is down 0.05 at 5.11. There are now only nine Dow components with gains. Most have completely rolled over.
4:00 pm: Markets close with all indices near the day's lows. It's the 8th losing day in the last 10. The Dow closes below 7200 for the second time this week. 22 Dow components close with losses, 8 with gains. Bank of America finishes with a cheerless win of 0.16, at 5.32.
Dow 7,182.08, -88.81 (1.22%)
NASDAQ 1,391.47, -33.96 (2.38%)
S&P 500 752.83, -12.07 (1.58%)
NYSE Composite 4,713.02, -40.15 (0.84%)
Market internals verified the session's finish. Declining issues outgunned advancers, 3755-2761. New lows: 460; new highs: 4, the lowest number of new highs I have seen since October of 2007. Volume was high once again, as investors alternately test and flee from equities.
NYSE Volume 1,482,993,000
NASDAQ Volume 2,348,150,000
Commodities were split. Crude oil for April delivery was up $2.72 to an unsustainable $45.22. Gold continued to correct on profit-taking, losing $23.60, to $942.60. Silver tumbled 94 cents, to $12.98, an excellent buying opportunity for long term investors.
Today's results were startling, stunning, unprecedented in the level of pessimism on display, expressing a remarkable distrust of government and overwhelming lack of confidence in the economic future. There is little doubt among investors that the government has failed to offer reasonable solutions to stem bank losses, job losses, income deterioration and revive - or even stabilize - the economy.
Treasury's Stress Test is Not a Plan at All
Editor's Note: I've had to break today's market coverage into two parts due to a need to provide some clarity on what the administration is planning to do with the nearly-insolvent banking sector. This entry will cover that issue, while the usual post - after 4:00 pm - will cover the day's market activity.
We've been hearing about Treasury Secretary Tim Geithner's "stress test" for the nation's largest banks in shrouded tones for over a week. Finally, late yesterday, some details of the plan emerged - in an exclusive interview with Jim Lehrer on the PBS Newshour - and elsewhere.
What the stress test will entail is having the banks examine their ability to function under a variety of very broad circumstances - first, a "moderate" scenario, in which unemployment
This commentary, by Adam S. Posen, Dep. Director, Peterson Institute for International Economics, lays out some guidelines which the Obama administration is conveniently avoiding.
And here's Paul Krugman opining in the New York Times that nationalization - in other words, having the federal government take over some banks, clean them up and resell the new, functioning, properly-capitalized entities to private investors.
Geithner and the Obama administration isn't listening, despite Krugman having won the Nobel Prize for Economics and other, similarly spot-on economists and commentators urging the government to make the appropriate hard choices, as opposed to the current piecemeal approach which hasn't - and isn't likely to - work.
The assumptions in the stress testing offers banks to look at two different sets of scenarios, a baseline and an extreme, or worst case outlook.
Under the baseline scenario, unemployment is at 8.4% in 2009 and 8.8% in 2010, housing prices decline by 14% in 2009 and another 4% in 2010, and the nation's Gross Domestic Product (GDP) falls by 2.0% in 2009 and rises by 2.1% in 2010.
In the worst case set-up, the assumptions are that unemployment reaches 8.9% in 2009 and 10.3 in 2010, housing prices fall 22% in 2009 and another 7% in 2010, and the nation's GDP falls by 3.3% in 2009 and gains 0.5% in 2010.
The banks will have about six weeks to report back to Geithner with either a confirmation that they're "OK" or a request for more funding from the government. That it will take six weeks to complete what is essentially nothing more than the testing of a theoretical set of circumstances against real world assets and liabilities suggests that the entire plan is nothing more than a politically-motivated cover-up for the banking giants which actually control the government.
This Bloomberg article suggests that the "worst case" scenarios laid out by the government are not severe enough, and that the banks will not not then be looking at what possibly lies ahead for the US economy.
The assessments may indeed be less severe than what's ahead, though the housing price assumptions appear somewhat on the money. Suppose GDP falls by 5% this year and another 2% next? What if unemployment hits 10.2% this year? Then the stress tests won't be testing the banks for reality and the entire plan will fail, meaning we will be sunk into a deeper recession for a longer time by supporting zombie banks which are at the heart of the problem.
In Geithner's interview with Lehrer, a the Treasury Secretary voiced a number of interesting comments, including, on the solvency of the banks involved:
In other words, Geithner seems to be wanting to tell us that the banks are sound, despite what's been reported concerning trillions of dollars worth of bad loans, even more toxic credit default swaps and continuing credit-creation issues.
Geithner would have us believe that all of these pre-existing conditions have suddenly, magically, vanished. It's not a believable scenario.
On "nationalization", Geithner opined, "it's the wrong strategy for the country and an unnecessary strategy." Again, Geithner would have us believe that what's always worked for smaller, insolvent institutions, that being take-over by FDIC, recapitalization and an eventual return to a functioning entity on the other side, is not acceptable for the largest banks in the nation.
This is the kind of thinking which inspires skepticism in the banking system and the government's remedies. This approach would allow the likes of John Mack, Lloyd Blankfien, Vikram Pandit and Kenneth Lewis to continue to run their failed institutions - the same ones which caused the crisis in the first place - with only a limited amount of scrutiny and accountability.
This would allow the same excesses in the securitization of loans and largely unsupervised lending and investing activity to continue, while failing to address the toxic loans and swaps at the root of the problem.
There will be no accountability for what's already occurred, no civil or criminal charges brought against the bank and finance executives whose institutions already have benefited from taxpayer capital infusions. The same executives who nearly brought the world's financial system to its knees will remain at the controls of their now-defunct banks.
Naturally, the banks have lined the coffers of both the Obama administration and all members of congress with campaign contributions, so there will be no opposition from any government official - elected or otherwise - to this plan whatsoever.
The stress test and Geithner financial band-aid plan should be recognized for exactly what it is: further denial of the root of the crisis and a sure recipe for disaster.
We've been hearing about Treasury Secretary Tim Geithner's "stress test" for the nation's largest banks in shrouded tones for over a week. Finally, late yesterday, some details of the plan emerged - in an exclusive interview with Jim Lehrer on the PBS Newshour - and elsewhere.
What the stress test will entail is having the banks examine their ability to function under a variety of very broad circumstances - first, a "moderate" scenario, in which unemployment
This commentary, by Adam S. Posen, Dep. Director, Peterson Institute for International Economics, lays out some guidelines which the Obama administration is conveniently avoiding.
And here's Paul Krugman opining in the New York Times that nationalization - in other words, having the federal government take over some banks, clean them up and resell the new, functioning, properly-capitalized entities to private investors.
Geithner and the Obama administration isn't listening, despite Krugman having won the Nobel Prize for Economics and other, similarly spot-on economists and commentators urging the government to make the appropriate hard choices, as opposed to the current piecemeal approach which hasn't - and isn't likely to - work.
The assumptions in the stress testing offers banks to look at two different sets of scenarios, a baseline and an extreme, or worst case outlook.
Under the baseline scenario, unemployment is at 8.4% in 2009 and 8.8% in 2010, housing prices decline by 14% in 2009 and another 4% in 2010, and the nation's Gross Domestic Product (GDP) falls by 2.0% in 2009 and rises by 2.1% in 2010.
In the worst case set-up, the assumptions are that unemployment reaches 8.9% in 2009 and 10.3 in 2010, housing prices fall 22% in 2009 and another 7% in 2010, and the nation's GDP falls by 3.3% in 2009 and gains 0.5% in 2010.
The banks will have about six weeks to report back to Geithner with either a confirmation that they're "OK" or a request for more funding from the government. That it will take six weeks to complete what is essentially nothing more than the testing of a theoretical set of circumstances against real world assets and liabilities suggests that the entire plan is nothing more than a politically-motivated cover-up for the banking giants which actually control the government.
This Bloomberg article suggests that the "worst case" scenarios laid out by the government are not severe enough, and that the banks will not not then be looking at what possibly lies ahead for the US economy.
The assessments may indeed be less severe than what's ahead, though the housing price assumptions appear somewhat on the money. Suppose GDP falls by 5% this year and another 2% next? What if unemployment hits 10.2% this year? Then the stress tests won't be testing the banks for reality and the entire plan will fail, meaning we will be sunk into a deeper recession for a longer time by supporting zombie banks which are at the heart of the problem.
In Geithner's interview with Lehrer, a the Treasury Secretary voiced a number of interesting comments, including, on the solvency of the banks involved:
"These banks now have very substantial amounts of capital relative to what you would have seen in the US economy going into previous recessions."
In other words, Geithner seems to be wanting to tell us that the banks are sound, despite what's been reported concerning trillions of dollars worth of bad loans, even more toxic credit default swaps and continuing credit-creation issues.
Geithner would have us believe that all of these pre-existing conditions have suddenly, magically, vanished. It's not a believable scenario.
On "nationalization", Geithner opined, "it's the wrong strategy for the country and an unnecessary strategy." Again, Geithner would have us believe that what's always worked for smaller, insolvent institutions, that being take-over by FDIC, recapitalization and an eventual return to a functioning entity on the other side, is not acceptable for the largest banks in the nation.
This is the kind of thinking which inspires skepticism in the banking system and the government's remedies. This approach would allow the likes of John Mack, Lloyd Blankfien, Vikram Pandit and Kenneth Lewis to continue to run their failed institutions - the same ones which caused the crisis in the first place - with only a limited amount of scrutiny and accountability.
This would allow the same excesses in the securitization of loans and largely unsupervised lending and investing activity to continue, while failing to address the toxic loans and swaps at the root of the problem.
There will be no accountability for what's already occurred, no civil or criminal charges brought against the bank and finance executives whose institutions already have benefited from taxpayer capital infusions. The same executives who nearly brought the world's financial system to its knees will remain at the controls of their now-defunct banks.
Naturally, the banks have lined the coffers of both the Obama administration and all members of congress with campaign contributions, so there will be no opposition from any government official - elected or otherwise - to this plan whatsoever.
The stress test and Geithner financial band-aid plan should be recognized for exactly what it is: further denial of the root of the crisis and a sure recipe for disaster.
Wednesday, February 25, 2009
Stress and Confusion on Wall Street
Is this Wall Street's week of reckoning?
Monday, stocks slid near 12-year lows. Tuesday's snap back rally offered some relief, but it was back to selling for most of the session on Wednesday. There isn't a trader alive who can tell where stocks will go Thursday and Friday.
Paramount among the issues yet to be resolved is the fate of the nation's 19 or 20 largest banks (The press and the government can't even agree on a number, that's how confused the condition is.) as the government commits them to various and sundry "stress tests."
According to what's been gleaned from two days of congressional testimony by Fed Chairman Ben Bernanke and the infrequent mutterings from Treasury Secretary Tim Geithner, government authorities will go into banks this week armed with accountants, number-crunchers and statistical models in an attempt to determine the general health of these mega-banks (over $100 billion in assets; are there any left?) and their ability to function normally under severe economic conditions.
Once these stress tests are completed, the government then should have a clearer understanding of what's needed to fix them, or whether they should be taken over by regulators, broken up, forced into bankruptcy or left alone. All of this has left Wall Street in a very confused condition, and the very thing the market appreciates least is uncertainty.
Stocks took on water early on, retracing most of Monday's decline by the noon hour. After that, there were a number of rallies, all of which eventually failed, despite stocks peeking into positive for about half an hour near the close. By 3:40 pm, however, the charade was over, and stocks sold off in a decided fashion.
Dow 7,270.89, -80.05 (1.09%)
Nasdaq 1,425.43, -16.40 (1.14%)
S&P 500 764.90, -8.24 (1.07%)
NYSE Composite 4,753.17, -68.57 (1.42%)
Other factors entered into the decision-making of investors, not the least of which was the report from the National Association of Realtors on January Existing Home Sales, which showed continuing deterioration in the real estate market with both the number of sales and the median price falling - a continuation of trends which have persisted for 14 months.
Granted, the general economy is not pretty, but the global economy is still standing. The questions posed by investors are precisely how well the economy is functioning and how well it will be in the near future. Nobody has yet offered solid answers to those important queries, and that's exactly what's causing investors to flee from stocks.
When the government does finally provide some further clarity, it should cause some soothing, though prospects will still remain mostly uncertain. It's what the government actually plans to do with the banks that will have the most impact, though the field is pretty well split on that judgment as well.
So, get used to wild trading swings, directionless markets, interpretations of news and then interpretations of the interpretations, punditry, thin analysis, politics and more nonsense about how to "fix" things than the market can bear.
Eventually, there will be resolution, but most humans being impatient when it comes to their financial futures, the waiting part is the hardest. And we are waiting. Get ready for at least six to nine more months of this before the market finds a floor (nice word for bottom), washes out the weak hands and moves ahead. Unless the government stimuli are completely worthless, at some point the market will simply revert back to fundamentals and investing can revert to something approaching normalcy.
For now, however, US and world markets are about as far removed from normal as they can be.
On the day, losers outdid gainers, 4193-2341, while new lows finished ahead of new highs, 489-13. Volume was on the high end, owing to the frenetic nature of the trading.
NYSE Volume 1,800,731,000
Nasdaq Volume 2,404,619,000
Oil priced higher by $2.54 a barrel, closing at $42.50. Gold continued to suffer from profit-taking, losing $3.30, to $966.20. Silver presented itself as a buy, losing 12 cents, to $13.91. Other commodities finished mixed, in keeping with the overall tone of the day, which was confused.
If you are in this market, you are on your own. I continue to only buy silver sporadically, on dips, and, despite mentioning that one could not be faulted for venturing into equities at this juncture, I am in no way advising anybody to do so. It's still a very dangerous, still bottomless, environment.
Monday, stocks slid near 12-year lows. Tuesday's snap back rally offered some relief, but it was back to selling for most of the session on Wednesday. There isn't a trader alive who can tell where stocks will go Thursday and Friday.
Paramount among the issues yet to be resolved is the fate of the nation's 19 or 20 largest banks (The press and the government can't even agree on a number, that's how confused the condition is.) as the government commits them to various and sundry "stress tests."
According to what's been gleaned from two days of congressional testimony by Fed Chairman Ben Bernanke and the infrequent mutterings from Treasury Secretary Tim Geithner, government authorities will go into banks this week armed with accountants, number-crunchers and statistical models in an attempt to determine the general health of these mega-banks (over $100 billion in assets; are there any left?) and their ability to function normally under severe economic conditions.
Once these stress tests are completed, the government then should have a clearer understanding of what's needed to fix them, or whether they should be taken over by regulators, broken up, forced into bankruptcy or left alone. All of this has left Wall Street in a very confused condition, and the very thing the market appreciates least is uncertainty.
Stocks took on water early on, retracing most of Monday's decline by the noon hour. After that, there were a number of rallies, all of which eventually failed, despite stocks peeking into positive for about half an hour near the close. By 3:40 pm, however, the charade was over, and stocks sold off in a decided fashion.
Dow 7,270.89, -80.05 (1.09%)
Nasdaq 1,425.43, -16.40 (1.14%)
S&P 500 764.90, -8.24 (1.07%)
NYSE Composite 4,753.17, -68.57 (1.42%)
Other factors entered into the decision-making of investors, not the least of which was the report from the National Association of Realtors on January Existing Home Sales, which showed continuing deterioration in the real estate market with both the number of sales and the median price falling - a continuation of trends which have persisted for 14 months.
Granted, the general economy is not pretty, but the global economy is still standing. The questions posed by investors are precisely how well the economy is functioning and how well it will be in the near future. Nobody has yet offered solid answers to those important queries, and that's exactly what's causing investors to flee from stocks.
When the government does finally provide some further clarity, it should cause some soothing, though prospects will still remain mostly uncertain. It's what the government actually plans to do with the banks that will have the most impact, though the field is pretty well split on that judgment as well.
So, get used to wild trading swings, directionless markets, interpretations of news and then interpretations of the interpretations, punditry, thin analysis, politics and more nonsense about how to "fix" things than the market can bear.
Eventually, there will be resolution, but most humans being impatient when it comes to their financial futures, the waiting part is the hardest. And we are waiting. Get ready for at least six to nine more months of this before the market finds a floor (nice word for bottom), washes out the weak hands and moves ahead. Unless the government stimuli are completely worthless, at some point the market will simply revert back to fundamentals and investing can revert to something approaching normalcy.
For now, however, US and world markets are about as far removed from normal as they can be.
On the day, losers outdid gainers, 4193-2341, while new lows finished ahead of new highs, 489-13. Volume was on the high end, owing to the frenetic nature of the trading.
NYSE Volume 1,800,731,000
Nasdaq Volume 2,404,619,000
Oil priced higher by $2.54 a barrel, closing at $42.50. Gold continued to suffer from profit-taking, losing $3.30, to $966.20. Silver presented itself as a buy, losing 12 cents, to $13.91. Other commodities finished mixed, in keeping with the overall tone of the day, which was confused.
If you are in this market, you are on your own. I continue to only buy silver sporadically, on dips, and, despite mentioning that one could not be faulted for venturing into equities at this juncture, I am in no way advising anybody to do so. It's still a very dangerous, still bottomless, environment.
Tuesday, February 24, 2009
Nice Bounce, But the Dow Is Headed to 5237
Tuesday was get even day for the bulls, wiping out most of Monday's losses, almost as though they never happened. But they did, as we know, with the Dow, S&P and NYSE Composite all breaking below support and hitting new lows.
So, while Tuesday will likely go down in the books as a simple snap-back rally, Monday was the more portentous of the two days, and we are now sure as shootin' going back to the 7100 level, though just when that happens is an open question.
Dow 7,350.94, +236.16 (3.32%)
NASDAQ 1,441.83, +54.11 (3.90%)
S&P 500 773.14, +29.81 (4.01%)
NYSE Composite 4,821.73, +187.95 (4.06%)
The likelihood of a rally is very good here, as the market was technically oversold. There are still speculators with cash in hand, dying to jump in and today was one such day. Their hopes of quick, easy money will be soon dashed. It took three months to retrace back to the November 20 lows, so surely a 2-4 month time span is surely appropriate for a revisit to 7114.78, yesterday's close.
For the rest of this week, though, and into next - prior to the Friday, March 6 BLS Non-farm Labor report - prospects are reasonably good for gains.
We've entered a period of the recession and bear market that may prove difficult to track and predict. Major indices have taken half off their 2007 peaks, so further deterioration should be slower and more agonizing. We could witness a period of sideways action for some months, but an eventual, final purge is needed and we haven't gotten to such capitulation yet. That could come in 6 weeks or 9 months. It's up to the markets and highly dependent on how well the government handles the crisis, which, up to this point, hasn't been very promising.
Fed Chairman, Ben Bernanke, testifying before congress today, said, "it is reasonable to expect the recession to end this year." Should we believe him? Maybe, maybe not. Recall, this is the same man who said that the subprime problem was "contained" back in the first quarter of 2008, so we know that his powers of prediction and grasp of the situation are less than accurate. Furthermore, he's presided over the worst economic catastrophe since the 30s, and as of yet his solutions haven't produced any positive developments. Still, even a broken clock is right twice a day, so, by calling for an end of the recession in 10 month's time, the erstwhile chairman has provided himself plenty of room for error.
Yesterday, I postulated that this recession, being larger and far different than anything other than the Great Depression, is going to last longer and plunge the US economy deeper than the others, which generally last 16-24 months. I am still looking at a horizon of 27-30 months duration, which puts recovery off until January 2010 at the earliest and June 2010 at the latest, using September through December 2007 as the actual start of the recession.
So, where's the bottom? I ran some calculations, using a fairly simplistic - but I believe sound - formula: comparing the price of the Dow Jones Industrials to the annual growth rate of US GDP.
I found an excellent site for tracking GDP growth rates by region and country back to 1961, here.
Using 1992 as a baseline, annual GDP growth over 17 years (1992-2008) came to 2.94%. Then, using the same baseline for the Dow, I calculated that 2.94% growth on top of the Dow at 3200 (an average closing price from January-March 1992, a very stable period). The result was 5237. Mark that number down, because that's where the Dow is headed.
To get an idea of just how overinflated the Dow (and stocks in general) had become from 2005-2008, consider that starting at 3200 in 1992, the Dow grew by more than 9% per year over that 17-year span. It's simply not believable, rational or normal for stocks to advance at such an exceptional rate. 2-5% is more like it, and that's why - back in the good old days before 1980 - investors sought out stocks more for their dividend yields than their growth potential.
Obviously, the internet and the coming of age of baby boomers brought in a gaggle of rubes who knew little about investing, and the market now has rewarded them justly by eviscerating most of their money. The market is probably going to take a little more before it's done.
One can argue that my analysis is too cursory, arbitrary and that it doesn't account for inflation or dividends, and to that I say, well, do your own analysis, please! I encourage all investors to analyze, slice and dice and dissect the markets for price discovery. There are many methods, and I believe mine will prove as sound as any. I'll state right here and now that I'll be within 400 points of the eventual, true bottom, and I'll accurately predict the market bottom to occur between August and November of this year. (Hey, it's only my reputation at risk here.)
Getting back to Tuesday's issues, besides Bernanke blathering at the insipid senators and lethargic legislators, the S&P/Case-Shiller Home Price Index dropped 18.55% in the 4th quarter of 2008 from the same period in 2007. Nationally, home prices are down 23% since their mid-2006 peak, suggesting that the decline is far from over.
Between the stimulus plan, bank bailout and foreclosure plan forwarded by the president and congress over the past few weeks, the housing market should bottom out by this time next year, with a total national decline of 34-38%, though many homes in what were once the hottest markets could fall by 50% or more.
Consumer confidence checked in today with a record low reading of 25.0, The Conference Board reported.
On the day, advancers finally held the edge over declining issues, 5271-1401. New lows continued ahead of new highs, 736-9. Volume was very strong, a function both of pent-up demand and furious short-covering.
NYSE Volume 1,841,785,000
NASDAQ Volume 2,371,004,000
Commodities were once again mixed. Crude oil futures finished $1.52 higher, at $39.96. Precious metals continued to be hit by a profit-taking wave, as gold pushed lower by $25.50, to $969.50. Silver presented investors with a buying opportunity, down 46 cents, to 14.00.
As mentioned before, gold and silver still look attractive at current levels and they will present buying opportunity over the next few weeks and months. Stocks are still risky, though if you are day-trading, good gains are possible for quick-turn artists.
So, while Tuesday will likely go down in the books as a simple snap-back rally, Monday was the more portentous of the two days, and we are now sure as shootin' going back to the 7100 level, though just when that happens is an open question.
Dow 7,350.94, +236.16 (3.32%)
NASDAQ 1,441.83, +54.11 (3.90%)
S&P 500 773.14, +29.81 (4.01%)
NYSE Composite 4,821.73, +187.95 (4.06%)
The likelihood of a rally is very good here, as the market was technically oversold. There are still speculators with cash in hand, dying to jump in and today was one such day. Their hopes of quick, easy money will be soon dashed. It took three months to retrace back to the November 20 lows, so surely a 2-4 month time span is surely appropriate for a revisit to 7114.78, yesterday's close.
For the rest of this week, though, and into next - prior to the Friday, March 6 BLS Non-farm Labor report - prospects are reasonably good for gains.
We've entered a period of the recession and bear market that may prove difficult to track and predict. Major indices have taken half off their 2007 peaks, so further deterioration should be slower and more agonizing. We could witness a period of sideways action for some months, but an eventual, final purge is needed and we haven't gotten to such capitulation yet. That could come in 6 weeks or 9 months. It's up to the markets and highly dependent on how well the government handles the crisis, which, up to this point, hasn't been very promising.
Fed Chairman, Ben Bernanke, testifying before congress today, said, "it is reasonable to expect the recession to end this year." Should we believe him? Maybe, maybe not. Recall, this is the same man who said that the subprime problem was "contained" back in the first quarter of 2008, so we know that his powers of prediction and grasp of the situation are less than accurate. Furthermore, he's presided over the worst economic catastrophe since the 30s, and as of yet his solutions haven't produced any positive developments. Still, even a broken clock is right twice a day, so, by calling for an end of the recession in 10 month's time, the erstwhile chairman has provided himself plenty of room for error.
Yesterday, I postulated that this recession, being larger and far different than anything other than the Great Depression, is going to last longer and plunge the US economy deeper than the others, which generally last 16-24 months. I am still looking at a horizon of 27-30 months duration, which puts recovery off until January 2010 at the earliest and June 2010 at the latest, using September through December 2007 as the actual start of the recession.
So, where's the bottom? I ran some calculations, using a fairly simplistic - but I believe sound - formula: comparing the price of the Dow Jones Industrials to the annual growth rate of US GDP.
I found an excellent site for tracking GDP growth rates by region and country back to 1961, here.
Using 1992 as a baseline, annual GDP growth over 17 years (1992-2008) came to 2.94%. Then, using the same baseline for the Dow, I calculated that 2.94% growth on top of the Dow at 3200 (an average closing price from January-March 1992, a very stable period). The result was 5237. Mark that number down, because that's where the Dow is headed.
To get an idea of just how overinflated the Dow (and stocks in general) had become from 2005-2008, consider that starting at 3200 in 1992, the Dow grew by more than 9% per year over that 17-year span. It's simply not believable, rational or normal for stocks to advance at such an exceptional rate. 2-5% is more like it, and that's why - back in the good old days before 1980 - investors sought out stocks more for their dividend yields than their growth potential.
Obviously, the internet and the coming of age of baby boomers brought in a gaggle of rubes who knew little about investing, and the market now has rewarded them justly by eviscerating most of their money. The market is probably going to take a little more before it's done.
One can argue that my analysis is too cursory, arbitrary and that it doesn't account for inflation or dividends, and to that I say, well, do your own analysis, please! I encourage all investors to analyze, slice and dice and dissect the markets for price discovery. There are many methods, and I believe mine will prove as sound as any. I'll state right here and now that I'll be within 400 points of the eventual, true bottom, and I'll accurately predict the market bottom to occur between August and November of this year. (Hey, it's only my reputation at risk here.)
Getting back to Tuesday's issues, besides Bernanke blathering at the insipid senators and lethargic legislators, the S&P/Case-Shiller Home Price Index dropped 18.55% in the 4th quarter of 2008 from the same period in 2007. Nationally, home prices are down 23% since their mid-2006 peak, suggesting that the decline is far from over.
Between the stimulus plan, bank bailout and foreclosure plan forwarded by the president and congress over the past few weeks, the housing market should bottom out by this time next year, with a total national decline of 34-38%, though many homes in what were once the hottest markets could fall by 50% or more.
Consumer confidence checked in today with a record low reading of 25.0, The Conference Board reported.
On the day, advancers finally held the edge over declining issues, 5271-1401. New lows continued ahead of new highs, 736-9. Volume was very strong, a function both of pent-up demand and furious short-covering.
NYSE Volume 1,841,785,000
NASDAQ Volume 2,371,004,000
Commodities were once again mixed. Crude oil futures finished $1.52 higher, at $39.96. Precious metals continued to be hit by a profit-taking wave, as gold pushed lower by $25.50, to $969.50. Silver presented investors with a buying opportunity, down 46 cents, to 14.00.
As mentioned before, gold and silver still look attractive at current levels and they will present buying opportunity over the next few weeks and months. Stocks are still risky, though if you are day-trading, good gains are possible for quick-turn artists.
Monday, February 23, 2009
The Sinking, Stinking S&P 500
The drumbeat of bad news and frightened investors continued unabated on Monday, after the government and Citigroup discussed plans to increase the level of US government ownership in the once-giant financial firm to as much as 40%.
Oddly enough, Citi was one of just two stocks on the Dow 30 to finish the day with gains. Odd, because on Friday, the White House issued a statement expressing that "banks in private hands" was their preference, which stabilized rapidly falling stocks, especially those of Citi and Bank of America (BAC), the other Dow issue which finished the day on the upside.
27 other Dow issues finished in the red on Monday; General Motors (GM) was unchanged at 1.77. The gains on the two banking stocks were minimal. Citigroup (C) ended the day up 0.19, to 2.14, while Bank of America gained 0.12, closing at 3.91.
While two of the largest US banks grappled with insolvency issues, the real story was witnessing the S&P 500 fall below the November 20 support level at 752.44. The NYSE Composite also broke through that same November 20 support (4651.21) during the session. Since the Dow broke down last week - and continued in free fall today - that leaves only the lonely NASDAQ as the one major index still above its 2008 bottom (1316.12).
Dow 7,114.78, -250.89 (3.41%)
NASDAQ 1,387.72, -53.51 (3.71%)
S&P 500 743.33, -26.72 (3.47%)
NYSE Composite 4,633.78, -170.73 (3.55%)
The headline numbers were more than sufficiently validated by internals. Losers beat gainers by a massive number, 5471-1183, nearly a 5-1 margin. New lows dominated new highs, 940-12. Regarding the highs-lows, it should be noted that new lows have held sway - on a day-to-day basis - every day for nearly 16 months, except for 5 or 6 instances, according to our own figures.
Volume moderated a bit, as expected, since options expiration was Friday.
NYSE Volume 1,612,611,000
NASDAQ Volume 2,040,330,000
With a dearth of either economic reports of corporate filings, investors had to fly somewhat blind, but even a bat could tell that sentiment was clearly negative, as the economy works through one of the worst recessions of all time.
The NASDAQ, S&P and NYSE Comp. are already off more than 50% from their October, 2007 highs, and the Dow is within 36 points of being exactly half of its all-time closing high of October 9, 2007 (14164.53).
Commodities continued lower as well. Crude oil for April delivery was off $1.59, to $38.44. Gold slipped $7.20, to $995.00. Silver fell 4 cents, to $14.45. The metals were hit by some profit-taking, as they have been on a tear of late, though this pause may not last long before the next leg up occurs.
The shiny stuff may be about the only true safe haven available right now as stocks are simply too risky, though some traders are moving into high-grade (BBB and above) corporate bond issues and munis, on the back of the government's recently-approved stimulus bill.
As far as a bottom in stocks is concerned, there is none in sight, though some idea of the length of the recession may provide a clue. Typically, recessions last 16-24 months, but since this one is anything but typical, it almost certainly run past the long end of that span. Since the downturn began roughly in December, 2007, we may be only 14 months in, meaning that 2009 should pretty much be written off. If the recession lasts 27 months (long by any measure except that of the Great Depression), recovery could begin March 2010.
If the markets begin to move roughly six months prior to the actual economic recovery, then October of this year may be a rough mark for a bottom and a potential time frame to begin nibbling at stocks.
With prices beaten down severely in many sectors, it would not be imprudent to take some calculated risks - especially if you have a long time horizon and ample discretionary funds - sooner. stocks have been hammered so badly, many are beginning to appear downright cheap. Nobody will be blamed for jumping the gun at this level, though only with small caliber bullets.
Oddly enough, Citi was one of just two stocks on the Dow 30 to finish the day with gains. Odd, because on Friday, the White House issued a statement expressing that "banks in private hands" was their preference, which stabilized rapidly falling stocks, especially those of Citi and Bank of America (BAC), the other Dow issue which finished the day on the upside.
27 other Dow issues finished in the red on Monday; General Motors (GM) was unchanged at 1.77. The gains on the two banking stocks were minimal. Citigroup (C) ended the day up 0.19, to 2.14, while Bank of America gained 0.12, closing at 3.91.
While two of the largest US banks grappled with insolvency issues, the real story was witnessing the S&P 500 fall below the November 20 support level at 752.44. The NYSE Composite also broke through that same November 20 support (4651.21) during the session. Since the Dow broke down last week - and continued in free fall today - that leaves only the lonely NASDAQ as the one major index still above its 2008 bottom (1316.12).
Dow 7,114.78, -250.89 (3.41%)
NASDAQ 1,387.72, -53.51 (3.71%)
S&P 500 743.33, -26.72 (3.47%)
NYSE Composite 4,633.78, -170.73 (3.55%)
The headline numbers were more than sufficiently validated by internals. Losers beat gainers by a massive number, 5471-1183, nearly a 5-1 margin. New lows dominated new highs, 940-12. Regarding the highs-lows, it should be noted that new lows have held sway - on a day-to-day basis - every day for nearly 16 months, except for 5 or 6 instances, according to our own figures.
Volume moderated a bit, as expected, since options expiration was Friday.
NYSE Volume 1,612,611,000
NASDAQ Volume 2,040,330,000
With a dearth of either economic reports of corporate filings, investors had to fly somewhat blind, but even a bat could tell that sentiment was clearly negative, as the economy works through one of the worst recessions of all time.
The NASDAQ, S&P and NYSE Comp. are already off more than 50% from their October, 2007 highs, and the Dow is within 36 points of being exactly half of its all-time closing high of October 9, 2007 (14164.53).
Commodities continued lower as well. Crude oil for April delivery was off $1.59, to $38.44. Gold slipped $7.20, to $995.00. Silver fell 4 cents, to $14.45. The metals were hit by some profit-taking, as they have been on a tear of late, though this pause may not last long before the next leg up occurs.
The shiny stuff may be about the only true safe haven available right now as stocks are simply too risky, though some traders are moving into high-grade (BBB and above) corporate bond issues and munis, on the back of the government's recently-approved stimulus bill.
As far as a bottom in stocks is concerned, there is none in sight, though some idea of the length of the recession may provide a clue. Typically, recessions last 16-24 months, but since this one is anything but typical, it almost certainly run past the long end of that span. Since the downturn began roughly in December, 2007, we may be only 14 months in, meaning that 2009 should pretty much be written off. If the recession lasts 27 months (long by any measure except that of the Great Depression), recovery could begin March 2010.
If the markets begin to move roughly six months prior to the actual economic recovery, then October of this year may be a rough mark for a bottom and a potential time frame to begin nibbling at stocks.
With prices beaten down severely in many sectors, it would not be imprudent to take some calculated risks - especially if you have a long time horizon and ample discretionary funds - sooner. stocks have been hammered so badly, many are beginning to appear downright cheap. Nobody will be blamed for jumping the gun at this level, though only with small caliber bullets.
Friday, February 20, 2009
Finding and Reviewing Business in Australia
I know there are a good number of globe-trotting and Aussie readers of this blog, so from time to time, I like to point out sites I think are useful, entertaining or informative. Then there are the days when certain sites are brought to my attention that satisfy all three criteria.
That's what I call a red-letter site, though you may just want to bookmark it. Today's site in question is known as Rave About It, and its functionality comes in a variety of forms.
One can browse or search for businesses, and one can also write reviews of businesses once signing in for an account. The search function is particularly strong, as it allows for searching for specifics in addition to by locale.
For instance, a search for party hire Sydney returns a wealth of results - everything from Funeral Caterers to Turquoise Turkish Cuisine, and, well, everything in between and beyond.
The site is extremely functional in that you can find a business, read other users' reviews and decide for yourself if it is worth your hard-earned money or whether you should keep on looking. The additional ability to review and rate (with 1-5 check marks) any business you might frequent or happen upon is a great benefit, not only for you, but for anyone who might be searching for a similar business, store, service or experience.
So, when traveling Down Under, don't forget to Rave About It.
That's what I call a red-letter site, though you may just want to bookmark it. Today's site in question is known as Rave About It, and its functionality comes in a variety of forms.
One can browse or search for businesses, and one can also write reviews of businesses once signing in for an account. The search function is particularly strong, as it allows for searching for specifics in addition to by locale.
For instance, a search for party hire Sydney returns a wealth of results - everything from Funeral Caterers to Turquoise Turkish Cuisine, and, well, everything in between and beyond.
The site is extremely functional in that you can find a business, read other users' reviews and decide for yourself if it is worth your hard-earned money or whether you should keep on looking. The additional ability to review and rate (with 1-5 check marks) any business you might frequent or happen upon is a great benefit, not only for you, but for anyone who might be searching for a similar business, store, service or experience.
So, when traveling Down Under, don't forget to Rave About It.
Stocks Hammered Again, But It Should Have Been Worse
After falling below key support on Tuesday, the Dow Jones Industrials, and US equities in general, were pounded down as fears of bank nationalization and unease over the future of the economy and even the welfare of the nation itself scared investors out of many positions.
While the technical damage on the Dow was serious, it should have been even worse, if not for subversive afternoon intervention by the usual corrupt cast of characters - the PPT, Goldman Sachs, Morgan Stanley, et. al. - which brought the Dow all the way back from a 215 point loss at 1:15 pm to a small gain at 10 minutes until 3:00.
At the heart of the matter was the fates of Bank of America and Citigroup, which suffered another day of crippling losses. At the low point of the day, Bank of America (BAC) was down 1.40, to 2.53, while Citigroup (C) fell 90 cents, to 1.51. On a basis unadjusted for splits, both were at all-time lows. Bank of America closed the day down a mere 14 cents, at 3.79, though Citigroup was not so fortunate, finishing 22% lower, down 56 cents at 1.95.
BofA CEO Ken Lewis was also subpoenaed by NY Attorney General Andrew Cuomo over the bonuses paid to Merrill Lynch executives in 2008. BofA took over Merrill under government supervision during the meltdown last fall.
It was only a hastily-prepared White House statement pledging a commitment to keeping banks in private hands that kept the markets from an all-out rout.
There's little doubt that the some kind of solution must be found for the ailing banking session, and soon. The public, however, has seen enough of bailouts and handouts, so the newly-installed Obama administration and Democratically-led congress must tread lightly.
Truth of the matter is that two of the nation's largest banks (and probably more) will have to be managed by the government, or somebody sober, for some time, in order to restore even a hint of credibility in the markets. There is also a distinct possibility that the government may not have sufficient power to prevent a complete collapse of an over-leveraged banking sector. In some ways, it is nothing more than the market hurrying the bankers' self-inflicted collapse.
Yesterday's rant by Rick Santelli at the Chicago Board of Trade (Feb. 19, 2009) on CNBC created no small sensation across the blogosphere. One of his more poignant remarks was his this gem:
Santelli was even called on the carpet by NBC's Brian Williams and Matt Lauer (NBC owns CNBC) on this morning's Today Show and put across the screen from his network nemesis, Steve Leisman, a puppy lapdog for the industrial-military-communications junta which rules the government and the nation. Santelli certainly has never backed down from a fight, and his performance on the Today Show was remarkably well-reasoned and honest with obvious middle-class populist overtones.
And now the censorship begins. While attempting to retrieve the code, I was initially met with a mention that the above-referenced video was no longer available on Youtube.com, a not-very-subtle attempt by the media elite to silence the truth and keep the public under wraps.. Don't be surprised if Santelli isn't quietly relieved of his duties soon or, more likely, continually marginalized. Nevertheless, as mentioned yesterday, the genie is well out of the bottle and the public outrage at just about anything and everything concerning government and big business will not be contained much longer.
Dow 7,365.67, -100.28 (1.34%)
NASDAQ 1,441.23, -1.59 (0.11%)
S&P 500 770.05, -8.89 (1.14%)
NYSE Compos 4,804.51, -76.65 (1.57%)
Internals were as expected, favoring declining issues over advancing ones, 4906-1775. New lows dominated new highs, expanding to new levels with 1119 new lows and a mere 25 new highs. The massive number of stocks hitting 52-week lows (1 in 6) have only been seen on days of extreme market turmoil, and today surely fit that bill. Volume was the highest in weeks, owing to options expirations, market intervention, usual trading and high levels of outright open executions on the sell side.
NYSE Volume 2,117,367,000
NASDAQ Volume 2,560,465,000
Commodities remained on their own track. Oil for March delivery closed down 54 cents, at $38.94 on the final day of that contract. Gold topped the $1000 mark, gaining $25.70, to $1,002.20. In concert, silver gained 56 cents, to $14.49. All food-related commodity futures were markedly lower.
The CPI figures released this morning demonstrated an increase of 0.4%, the first gain since July, 2008, though it is more than likely only an aberration in the continuing deflationary spiral.
Stocks should have finished much lower than they did today, which only means that they will fall further at some future date. Considering the level of angst in the market, in the public, and the ineptitude of government and corporate business to constrain the wealth destruction leads one to believe that the market is well into the third and most crucial phase of the bear market, total, utter, final capitulation.
All of the major indices finished the week with substantial losses. The Dow registered its lowest close since October 27, 1997.
For the week, the Dow was down a whopping 485 points, and closing in on a 50% decline from the October 2007 all-time high. The NASDAQ lost 93 points; the S&P surrendered 57; the NYSE Composite was down 402 points.
It's not a pretty picture and not likely to improve soon.
While the technical damage on the Dow was serious, it should have been even worse, if not for subversive afternoon intervention by the usual corrupt cast of characters - the PPT, Goldman Sachs, Morgan Stanley, et. al. - which brought the Dow all the way back from a 215 point loss at 1:15 pm to a small gain at 10 minutes until 3:00.
At the heart of the matter was the fates of Bank of America and Citigroup, which suffered another day of crippling losses. At the low point of the day, Bank of America (BAC) was down 1.40, to 2.53, while Citigroup (C) fell 90 cents, to 1.51. On a basis unadjusted for splits, both were at all-time lows. Bank of America closed the day down a mere 14 cents, at 3.79, though Citigroup was not so fortunate, finishing 22% lower, down 56 cents at 1.95.
BofA CEO Ken Lewis was also subpoenaed by NY Attorney General Andrew Cuomo over the bonuses paid to Merrill Lynch executives in 2008. BofA took over Merrill under government supervision during the meltdown last fall.
It was only a hastily-prepared White House statement pledging a commitment to keeping banks in private hands that kept the markets from an all-out rout.
There's little doubt that the some kind of solution must be found for the ailing banking session, and soon. The public, however, has seen enough of bailouts and handouts, so the newly-installed Obama administration and Democratically-led congress must tread lightly.
Truth of the matter is that two of the nation's largest banks (and probably more) will have to be managed by the government, or somebody sober, for some time, in order to restore even a hint of credibility in the markets. There is also a distinct possibility that the government may not have sufficient power to prevent a complete collapse of an over-leveraged banking sector. In some ways, it is nothing more than the market hurrying the bankers' self-inflicted collapse.
Yesterday's rant by Rick Santelli at the Chicago Board of Trade (Feb. 19, 2009) on CNBC created no small sensation across the blogosphere. One of his more poignant remarks was his this gem:
You know, they’re pretty much of the notion that you can’t buy your way into prosperity, and if the multiplier that all of these Washington economists are selling us is over… that we never have to worry about the economy again. The government should spend a trillion dollars an hour because we’ll get 1.5 trillion back.
Santelli was even called on the carpet by NBC's Brian Williams and Matt Lauer (NBC owns CNBC) on this morning's Today Show and put across the screen from his network nemesis, Steve Leisman, a puppy lapdog for the industrial-military-communications junta which rules the government and the nation. Santelli certainly has never backed down from a fight, and his performance on the Today Show was remarkably well-reasoned and honest with obvious middle-class populist overtones.
And now the censorship begins. While attempting to retrieve the code, I was initially met with a mention that the above-referenced video was no longer available on Youtube.com, a not-very-subtle attempt by the media elite to silence the truth and keep the public under wraps.. Don't be surprised if Santelli isn't quietly relieved of his duties soon or, more likely, continually marginalized. Nevertheless, as mentioned yesterday, the genie is well out of the bottle and the public outrage at just about anything and everything concerning government and big business will not be contained much longer.
Dow 7,365.67, -100.28 (1.34%)
NASDAQ 1,441.23, -1.59 (0.11%)
S&P 500 770.05, -8.89 (1.14%)
NYSE Compos 4,804.51, -76.65 (1.57%)
Internals were as expected, favoring declining issues over advancing ones, 4906-1775. New lows dominated new highs, expanding to new levels with 1119 new lows and a mere 25 new highs. The massive number of stocks hitting 52-week lows (1 in 6) have only been seen on days of extreme market turmoil, and today surely fit that bill. Volume was the highest in weeks, owing to options expirations, market intervention, usual trading and high levels of outright open executions on the sell side.
NYSE Volume 2,117,367,000
NASDAQ Volume 2,560,465,000
Commodities remained on their own track. Oil for March delivery closed down 54 cents, at $38.94 on the final day of that contract. Gold topped the $1000 mark, gaining $25.70, to $1,002.20. In concert, silver gained 56 cents, to $14.49. All food-related commodity futures were markedly lower.
The CPI figures released this morning demonstrated an increase of 0.4%, the first gain since July, 2008, though it is more than likely only an aberration in the continuing deflationary spiral.
Stocks should have finished much lower than they did today, which only means that they will fall further at some future date. Considering the level of angst in the market, in the public, and the ineptitude of government and corporate business to constrain the wealth destruction leads one to believe that the market is well into the third and most crucial phase of the bear market, total, utter, final capitulation.
All of the major indices finished the week with substantial losses. The Dow registered its lowest close since October 27, 1997.
For the week, the Dow was down a whopping 485 points, and closing in on a 50% decline from the October 2007 all-time high. The NASDAQ lost 93 points; the S&P surrendered 57; the NYSE Composite was down 402 points.
It's not a pretty picture and not likely to improve soon.
Thursday, February 19, 2009
Panic Selling Crashes Stocks Through False Bottom
Yesterday's manipulated close above the false bottom at Dow 7552 could not hold, not even for a day, in the wake of unprecedented government handouts and institutional selling that nearly brought the major stock indices to their knees in the final hours of Thursday's session. The Dow Jones Industrials finished the day at their lowest level since October 9, 2002, prior, even to the start of the Iraq War.
The best the government interlopers (through their proxies at Goldman Sachs, Morgan Stanley, et. al.) could muster today was putting a good face on an unmitigated disaster. The game is over for Wall Street. A massive systemic collapse of global finance is palpable and seemingly inevitable.
With an opening pop, investors bought the Dow up about 60 points, but the market could not sustain the gains. By 10:30 the index was back into the red. After a brief, heartless rally, stocks cascaded lower with the Dow eventually falling below 7450. From 11:30 to the close, the the major indices were all under water. Selling was relentless, with the occasional covering of options positions, which close tomorrow. A line could be drawn diagonally across the tops. The slope of the bottoms was more severe.
Dow 7,465.95, -89.68 (1.19%)
NASDAQ 1,442.82, -25.15 (1.71%)
S&P 500 778.94, -9.48 (1.20%)
NYSE Compos 4,881.16, -43.38 (0.88%)
It was not the size of the losses that mattered much in this session, but the overall tenor and tone of trading. The level of desperation as a standard emotion continues to deepen, even daily. People are angry. The press, economists, and the public are all up in arms over the rapid-fire moves of the federal government. Most of the abuse is being heaped upon newly-elected President Obama, though much of the focus is rightfully on the US congress.
Unsurprisingly, the Dow components were a shambles, 20 down and 10 up, with most of the largest losses sustained by financials and tech, though the damage was truly broad-based. Paradoxically, the largest percentage gainer on the Dow was Home Depot, which gained 1.82%, up 0.36 to 20.16.
If you're seeking a good proxy for the Dow, look no further than JP Morgan Chase (JPM), which turned negative today just as the Dow was rolling over. The pride of Wall Street banking, JPM is probably overvalued by a factor of 5-10, since it is in largely the same boat as brethren Bank of America and Citigroup, all of whom are in the government's notorious gang of Systemically Significantly Failing Institutions under the Capital Purchase Program.
JP Morgan Chase dipped 0.91 to 20.60, a mere 4.23% loss, but it is joined at the hip to Bank of America (-0.64, 3.93, -14%) and Citigroup (-40, 2.51, -13.75).
The January Producer Price Index (PPI) registered its first gain in six months, edging up 0.8% over December. This shouldn't have come as much of a surprise, since retailers discounted heavily in December during one of the worst holiday shopping seasons in memory.
Inflation alarmists should also take a cold shower on this news, as much of the increase was due to slightly higher energy prices, and, of course, the figures are seasonally adjusted. Deflation continues to rule.
But the real story of the day was the final breakdown through the November 20 bottom on the Dow. The process will no doubt continue as the other indices approach and retest their lows. The markets are again in uncharted territory.
Friday's action most certainly will be among the most volatile of recent vintage. Thursday was only a prelude to the real wealth-cleansing that will occur over the coming days, weeks and months.
Internals did little to mask the carnage. Decliners swept by advancers, 4384-2129. New lows outnumbered new highs, 617-11. Volume was strong enough to suggest more selling as more participants become engaged in a race to the bottom.
NYSE Volume 1,485,501,000
NASDAQ Volume 2,036,313,000
Commodities exhibited perhaps the most random and directionless trade in decades. Oil priced $4.86 higher, to $39.48. Gold fell $1.70, to $976.50, while silver lost 36 cents, to $13.94. The metals cooled off what was, until today, a torrid rally. Beef and corn were up, pork and soybeans were down. Natural gas fell to a new seasonal low as at $4.11, as milder weather and conservation measures are keeping demand tamped down.
The level of unrest, not only on Wall Street but on Main Street and across the nation and around the world, cannot be underestimated. Cheats and scoundrels in government and business have opened the gates of hell with their wrong-headed policies over many years. Another of America's dates with destiny is fast approaching.
Brace yourself.
The best the government interlopers (through their proxies at Goldman Sachs, Morgan Stanley, et. al.) could muster today was putting a good face on an unmitigated disaster. The game is over for Wall Street. A massive systemic collapse of global finance is palpable and seemingly inevitable.
With an opening pop, investors bought the Dow up about 60 points, but the market could not sustain the gains. By 10:30 the index was back into the red. After a brief, heartless rally, stocks cascaded lower with the Dow eventually falling below 7450. From 11:30 to the close, the the major indices were all under water. Selling was relentless, with the occasional covering of options positions, which close tomorrow. A line could be drawn diagonally across the tops. The slope of the bottoms was more severe.
Dow 7,465.95, -89.68 (1.19%)
NASDAQ 1,442.82, -25.15 (1.71%)
S&P 500 778.94, -9.48 (1.20%)
NYSE Compos 4,881.16, -43.38 (0.88%)
It was not the size of the losses that mattered much in this session, but the overall tenor and tone of trading. The level of desperation as a standard emotion continues to deepen, even daily. People are angry. The press, economists, and the public are all up in arms over the rapid-fire moves of the federal government. Most of the abuse is being heaped upon newly-elected President Obama, though much of the focus is rightfully on the US congress.
Unsurprisingly, the Dow components were a shambles, 20 down and 10 up, with most of the largest losses sustained by financials and tech, though the damage was truly broad-based. Paradoxically, the largest percentage gainer on the Dow was Home Depot, which gained 1.82%, up 0.36 to 20.16.
If you're seeking a good proxy for the Dow, look no further than JP Morgan Chase (JPM), which turned negative today just as the Dow was rolling over. The pride of Wall Street banking, JPM is probably overvalued by a factor of 5-10, since it is in largely the same boat as brethren Bank of America and Citigroup, all of whom are in the government's notorious gang of Systemically Significantly Failing Institutions under the Capital Purchase Program.
JP Morgan Chase dipped 0.91 to 20.60, a mere 4.23% loss, but it is joined at the hip to Bank of America (-0.64, 3.93, -14%) and Citigroup (-40, 2.51, -13.75).
The January Producer Price Index (PPI) registered its first gain in six months, edging up 0.8% over December. This shouldn't have come as much of a surprise, since retailers discounted heavily in December during one of the worst holiday shopping seasons in memory.
Inflation alarmists should also take a cold shower on this news, as much of the increase was due to slightly higher energy prices, and, of course, the figures are seasonally adjusted. Deflation continues to rule.
But the real story of the day was the final breakdown through the November 20 bottom on the Dow. The process will no doubt continue as the other indices approach and retest their lows. The markets are again in uncharted territory.
Friday's action most certainly will be among the most volatile of recent vintage. Thursday was only a prelude to the real wealth-cleansing that will occur over the coming days, weeks and months.
Internals did little to mask the carnage. Decliners swept by advancers, 4384-2129. New lows outnumbered new highs, 617-11. Volume was strong enough to suggest more selling as more participants become engaged in a race to the bottom.
NYSE Volume 1,485,501,000
NASDAQ Volume 2,036,313,000
Commodities exhibited perhaps the most random and directionless trade in decades. Oil priced $4.86 higher, to $39.48. Gold fell $1.70, to $976.50, while silver lost 36 cents, to $13.94. The metals cooled off what was, until today, a torrid rally. Beef and corn were up, pork and soybeans were down. Natural gas fell to a new seasonal low as at $4.11, as milder weather and conservation measures are keeping demand tamped down.
The level of unrest, not only on Wall Street but on Main Street and across the nation and around the world, cannot be underestimated. Cheats and scoundrels in government and business have opened the gates of hell with their wrong-headed policies over many years. Another of America's dates with destiny is fast approaching.
Brace yourself.
Will Congress Ever Represent the Public Interest?
Now that President Obama and the Dem-controlled congress has spent somewhere in the neighborhood of $1.5 Trillion over the past few weeks, one wonders from where - especially in the stimulus bill - the new jobs are going to come.
There is plenty of money being thrown at Wall Street banking interests, state governments, food stamps, unemployment insurance, mortgage defaults and public works projects, but nowhere is found a single tax credit or incentive for small businesses to actually hire anyone.
It seems that since small business creates more than 90% of private sector jobs, congress would have included something along those lines, maybe even (my idea here) swapping unemployment benefits for actual work. My concept would put to work people collecting unemployment, by requiring them to find a job in a relevant industry. The business would only have to pay a small amount for, say, six months, like 1/4 to 1/3 of the amount the recipient is receiving in benefits, while the worker is integrated into the business.
Not only would the worker have a job guaranteed after his benefits run out, the government would pick up much of the tab during the initial period. Of course, the business would have to keep all current employees on the job (to avoid cheating the system) during this period and guarantee employment to the worker for at least another 6 months to a year.
Well, that's just one idea, but another would be for congress to actually get up to speed with the rest of us by running some public surveys available in 360 degree software or other such programs.
Imagine congress sending an email to constituents, or putting a public interest poll on their taxpayer-funded web sites with real choices for real legislative options.
Maybe it's just too much to ask of our special interest congress. But, it is nice to think about.
There is plenty of money being thrown at Wall Street banking interests, state governments, food stamps, unemployment insurance, mortgage defaults and public works projects, but nowhere is found a single tax credit or incentive for small businesses to actually hire anyone.
It seems that since small business creates more than 90% of private sector jobs, congress would have included something along those lines, maybe even (my idea here) swapping unemployment benefits for actual work. My concept would put to work people collecting unemployment, by requiring them to find a job in a relevant industry. The business would only have to pay a small amount for, say, six months, like 1/4 to 1/3 of the amount the recipient is receiving in benefits, while the worker is integrated into the business.
Not only would the worker have a job guaranteed after his benefits run out, the government would pick up much of the tab during the initial period. Of course, the business would have to keep all current employees on the job (to avoid cheating the system) during this period and guarantee employment to the worker for at least another 6 months to a year.
Well, that's just one idea, but another would be for congress to actually get up to speed with the rest of us by running some public surveys available in 360 degree software or other such programs.
Imagine congress sending an email to constituents, or putting a public interest poll on their taxpayer-funded web sites with real choices for real legislative options.
Maybe it's just too much to ask of our special interest congress. But, it is nice to think about.
Wednesday, February 18, 2009
Dow Players Paint Tape, Confirm (False) Double Bottom
Stocks began the day with small gains and hit the day's highs shortly after noon, though they were clearly under pressure all day.
While the Dow flirted with the flat line in a very narrow range through almost all of the session, sentiment was severely split. Neither bears nor bulls could muster enough energy to move stocks clearly in one direction or the other, though the NYSE Composite and the S&P 500 spent the majority of the day in the red.
The Dow stayed on a somewhat even keel all session long, even though there were never more than 13 of the 30 stocks inside the index showing gains. Chief among the gainers was Wal-Mart (WMT), which finished the day with the biggest gain of any Dow component, up 1.76, to an even 50.00.
Others which aided the index from falling were Intel (INTC), McDonald's (MCD), IBM (IBM), Proctor Gamble (PG) and ExxonMobil (XOM). The case could be made for selective boosting of the Dow by insiders, as any number of players did not want to witness another bout of selling after yesterday's classic double bottom formation.
One had to look only so far as ExxonMobile vs. Chevron (CHV). While the former was higher all day, the latter was underwater throughout the afternoon except for the final half hour, despite the two of them being in essentially the same business. Chevron finished with a 6 cent loss, while ExxonMobil ended the day with a 66 cent gain.
At the end of the day, the bulls prevailed, lifting the Dow by the smallest of margins, notably on late day buying of just three stocks: Chevron (CHV), American Express (AXP) and Merck (MRK), each of which spent almost the entire day lower before a burst of buying in the final half hour of trading.
Dow 7,555.63, +3.03 (0.04%)
NASDAQ 1,467.97, -2.69 (0.18%)
S&P 500 788.42, -0.75 (0.10%)
NYSE Composite 4,924.54, -14.57 (0.29%)
Adding to the argument of the bears is the fact that only the Dow finished in positive territory, further evidence of insider trading in a concerted effort to finish above the now double bottom at 7552.29 (Nov. 20) and 7552.60 (Feb. 17). Their argument is hardly convincing when considering the various factors affecting market movement.
The internals were decidedly bearish, to a point at which one must question today's headline results. Advancing issues were buried under a deluge of losers, with decliners ahead, 4396-2120, a better-than 2-1 margin. Further, the gap between new lows and new highs expanded greatly, with 661 new lows to just 22 new highs. Those two indicators strongly suggest that today's finish on the Dow was a serious case of painting the tape so that the bullish cause can now call a bottom, right there at 7552 and change.
Nothing could be further from the truth. First, the Dow's gains were insignificant. Second, the other three indices finished lower and have not come close to retesting their respective lows. Third, the new highs/new lows and advance/decline lines were of a nature more like a day in which the Dow would have lost 100-200 points. Fourth, Most of the Dow stocks were lower, with the final tally at 12 up and 18 down, with the biggest volume stocks sharply lower.
NYSE Volume 1,433,404,000
NASDAQ Volume 2,060,209,000
Two largest volume movers by far - Citigroup (C) and Bank of America (BAC) were down substantially all day long with Bank of America suffering a 6.73% loss, down 0.33, to $4.57. Citigroup was down 4.90%, losing 0.15, to 2.91.
There is a growing acceptance that those two - the largest banks in America - will have to undergo some form of government receivership, or, "nationalization" in a controlled divestiture or bankruptcy proceeding with the likely assistance of the FDIC, Treasury and the Federal Reserve.
Once again, commodity prices were mixed, though similar to Tuesday's action. The metals were all higher, while foodstuffs were markedly lower, as was oil, losing 31 cents, to $34.62. Gold galloped ahead by $10.70, to $978.20, while the rally in silver continued unabated, up another 28 cents, to $14.29.
Adding to the bear case were the four economic indicators, all showing signs of stress by registering numbers for January that were down and lower than expected. Housing starts fell to 466,000, from 560,000 in December. Building permits fell to 521,000, from 547,000 in the prior month. Capacity utilization continued in free fall, down to 72% form 73.3% a month earlier. So too, industrial production, falling by 1.8% on the heels of a 2.4% fall in December.
As far as a double bottom is concerned, the charts will confirm it because they do not lie, even though the results of today's trading are highly suspect. In the end, this will be seen only as a support/resistance level as another move lower is clearly in the cards.
The manipulators in the marketplace may get a temporary boost on false hopes, though it's just as likely that the markets will continue to deteriorate and today was only an effort mixed in with Friday's options expiration. The Dow could easily lose (or gain) 300-500 points be the end of the week. It could also meander along in a meaningless pattern for some time, but eventually, this bottom will be taken out, because it is a false one.
While the Dow flirted with the flat line in a very narrow range through almost all of the session, sentiment was severely split. Neither bears nor bulls could muster enough energy to move stocks clearly in one direction or the other, though the NYSE Composite and the S&P 500 spent the majority of the day in the red.
The Dow stayed on a somewhat even keel all session long, even though there were never more than 13 of the 30 stocks inside the index showing gains. Chief among the gainers was Wal-Mart (WMT), which finished the day with the biggest gain of any Dow component, up 1.76, to an even 50.00.
Others which aided the index from falling were Intel (INTC), McDonald's (MCD), IBM (IBM), Proctor Gamble (PG) and ExxonMobil (XOM). The case could be made for selective boosting of the Dow by insiders, as any number of players did not want to witness another bout of selling after yesterday's classic double bottom formation.
One had to look only so far as ExxonMobile vs. Chevron (CHV). While the former was higher all day, the latter was underwater throughout the afternoon except for the final half hour, despite the two of them being in essentially the same business. Chevron finished with a 6 cent loss, while ExxonMobil ended the day with a 66 cent gain.
At the end of the day, the bulls prevailed, lifting the Dow by the smallest of margins, notably on late day buying of just three stocks: Chevron (CHV), American Express (AXP) and Merck (MRK), each of which spent almost the entire day lower before a burst of buying in the final half hour of trading.
Dow 7,555.63, +3.03 (0.04%)
NASDAQ 1,467.97, -2.69 (0.18%)
S&P 500 788.42, -0.75 (0.10%)
NYSE Composite 4,924.54, -14.57 (0.29%)
Adding to the argument of the bears is the fact that only the Dow finished in positive territory, further evidence of insider trading in a concerted effort to finish above the now double bottom at 7552.29 (Nov. 20) and 7552.60 (Feb. 17). Their argument is hardly convincing when considering the various factors affecting market movement.
The internals were decidedly bearish, to a point at which one must question today's headline results. Advancing issues were buried under a deluge of losers, with decliners ahead, 4396-2120, a better-than 2-1 margin. Further, the gap between new lows and new highs expanded greatly, with 661 new lows to just 22 new highs. Those two indicators strongly suggest that today's finish on the Dow was a serious case of painting the tape so that the bullish cause can now call a bottom, right there at 7552 and change.
Nothing could be further from the truth. First, the Dow's gains were insignificant. Second, the other three indices finished lower and have not come close to retesting their respective lows. Third, the new highs/new lows and advance/decline lines were of a nature more like a day in which the Dow would have lost 100-200 points. Fourth, Most of the Dow stocks were lower, with the final tally at 12 up and 18 down, with the biggest volume stocks sharply lower.
NYSE Volume 1,433,404,000
NASDAQ Volume 2,060,209,000
Two largest volume movers by far - Citigroup (C) and Bank of America (BAC) were down substantially all day long with Bank of America suffering a 6.73% loss, down 0.33, to $4.57. Citigroup was down 4.90%, losing 0.15, to 2.91.
There is a growing acceptance that those two - the largest banks in America - will have to undergo some form of government receivership, or, "nationalization" in a controlled divestiture or bankruptcy proceeding with the likely assistance of the FDIC, Treasury and the Federal Reserve.
Once again, commodity prices were mixed, though similar to Tuesday's action. The metals were all higher, while foodstuffs were markedly lower, as was oil, losing 31 cents, to $34.62. Gold galloped ahead by $10.70, to $978.20, while the rally in silver continued unabated, up another 28 cents, to $14.29.
Adding to the bear case were the four economic indicators, all showing signs of stress by registering numbers for January that were down and lower than expected. Housing starts fell to 466,000, from 560,000 in December. Building permits fell to 521,000, from 547,000 in the prior month. Capacity utilization continued in free fall, down to 72% form 73.3% a month earlier. So too, industrial production, falling by 1.8% on the heels of a 2.4% fall in December.
As far as a double bottom is concerned, the charts will confirm it because they do not lie, even though the results of today's trading are highly suspect. In the end, this will be seen only as a support/resistance level as another move lower is clearly in the cards.
The manipulators in the marketplace may get a temporary boost on false hopes, though it's just as likely that the markets will continue to deteriorate and today was only an effort mixed in with Friday's options expiration. The Dow could easily lose (or gain) 300-500 points be the end of the week. It could also meander along in a meaningless pattern for some time, but eventually, this bottom will be taken out, because it is a false one.
Tuesday, February 17, 2009
What's in Your Wallet? Not Much, Says Capital One
I'm not sure, but probably more than 30% of all adult Americans have a Capital One credit card. I used to have two, before the company - kicking and screaming all the way - finally acceded to my demands to combine them into one.
While checking some financial sector stocks earlier today, I noticed that Capital One (COF) has taken a hellacious beating this year. Since closing at 31.05 on December 31, 2008, the stock has received a 67% haircut, down to 10.13. Capital One is the nation's largest purveyor of individual credit cards, but also dabbles in making new car loans, home equity loans and other, similarly risky endeavors.
The company is notably the subprime credit lender of nearly last resort to consumers who have tapped out their home equity and are now piling up credit card debt, typically at rates of 15% and higher, and now it appears that many are not paying back their lender, as Forbes reports:
Apparently, when it comes to paying their debt to Capital One, there really isn't much left in people's wallets, much to the displeasure of COF shareholders, as the company wiped out all of the year's gains in 2008 with a 4th quarter loss of $3.74 per share.
Much of Wall Street was sharing the pain with Capital One, as stocks took yet another drubbing, with the Dow falling to within a whisker of the November 20 low (7552.29), closing right at the lows of the day, 7552.60.
This sets the stage for an interesting remainder of the week, as today's close is undeniably a double bottom on the Dow. The other majors are close to their previous lows, but not quite there.
Dow 7,552.60, -297.81 (3.79%)
NASDAQ 1,470.66, -63.70 (4.15%)
S&P 500 789.17, -37.67 (4.56%)
NYSE Compos 4,939.12, -267.64 (5.14%)
The NASDAQ has another 154 points to go, the S&P would have to shed another 36 points and the NYSE Composite is still 288 above its November 20 close. Obviously, the bank and financial stocks of the Dow have weighed heavily of late.
Bank of America (BAC) crossed the $5 Rubicon again, closing at 4.90, down 67 cents. CitiGroup (C) continued down the rat hole, losing 43 cents, to 3.06. even venerable JP Morgan Chase (JPM) lost 3.04, to 21.65. Each of those company's shares were down by more than 12% on the session.
Market internals verified just how rough a day it was for US stocks. Declining issues absolutely slammed advancers, 5803-775. New lows expanded to 555, versus a paltry 18 new highs. Volume was outstanding, signaling more selling dead ahead. Only one issue of the Dow 30 closed with a gain: Wal-Mart (WMT). For more on that, see below.
NYSE Volume 1,590,783,000
NASDAQ Volume 2,395,914,000
Commodities were split down the middle. Anything consumable, from unleaded gas to pork bellies, was down, while the precious metals shot to short term highs. Crude oil for March delivery were down $2.58, to $34.93; natural gas was off 22 cents, to $4.22, and wholesale unleaded gas closed at $1.11, begging the question as to how most consumers are paying roughly $2.00 at the pump. Look for another record quarter for the oil companies.
Gold gained $25.30, to $967.50. Silver broke 39 cents higher, to $14.01. With deflation clearly the issue, one has to wonder how far the bulls will push the metals. They are, after all, investment hedges - primarily against inflation - but commodities at heart.
Investors find themselves at a critical crossroad at the open tomorrow. Considering that only the Dow has retraced its low, it should be a pretty safe bet that all indices are heading lower in the short term.
Want to know why Wal-Mart was the only Dow component to show a gain on the day? Watch the video below:
While checking some financial sector stocks earlier today, I noticed that Capital One (COF) has taken a hellacious beating this year. Since closing at 31.05 on December 31, 2008, the stock has received a 67% haircut, down to 10.13. Capital One is the nation's largest purveyor of individual credit cards, but also dabbles in making new car loans, home equity loans and other, similarly risky endeavors.
The company is notably the subprime credit lender of nearly last resort to consumers who have tapped out their home equity and are now piling up credit card debt, typically at rates of 15% and higher, and now it appears that many are not paying back their lender, as Forbes reports:
The company also reported its annual net charge-off rate a measure of credit default, for U.S. credit cards rose to 7.82% in January from 7.71% in December.
Apparently, when it comes to paying their debt to Capital One, there really isn't much left in people's wallets, much to the displeasure of COF shareholders, as the company wiped out all of the year's gains in 2008 with a 4th quarter loss of $3.74 per share.
Much of Wall Street was sharing the pain with Capital One, as stocks took yet another drubbing, with the Dow falling to within a whisker of the November 20 low (7552.29), closing right at the lows of the day, 7552.60.
This sets the stage for an interesting remainder of the week, as today's close is undeniably a double bottom on the Dow. The other majors are close to their previous lows, but not quite there.
Dow 7,552.60, -297.81 (3.79%)
NASDAQ 1,470.66, -63.70 (4.15%)
S&P 500 789.17, -37.67 (4.56%)
NYSE Compos 4,939.12, -267.64 (5.14%)
The NASDAQ has another 154 points to go, the S&P would have to shed another 36 points and the NYSE Composite is still 288 above its November 20 close. Obviously, the bank and financial stocks of the Dow have weighed heavily of late.
Bank of America (BAC) crossed the $5 Rubicon again, closing at 4.90, down 67 cents. CitiGroup (C) continued down the rat hole, losing 43 cents, to 3.06. even venerable JP Morgan Chase (JPM) lost 3.04, to 21.65. Each of those company's shares were down by more than 12% on the session.
Market internals verified just how rough a day it was for US stocks. Declining issues absolutely slammed advancers, 5803-775. New lows expanded to 555, versus a paltry 18 new highs. Volume was outstanding, signaling more selling dead ahead. Only one issue of the Dow 30 closed with a gain: Wal-Mart (WMT). For more on that, see below.
NYSE Volume 1,590,783,000
NASDAQ Volume 2,395,914,000
Commodities were split down the middle. Anything consumable, from unleaded gas to pork bellies, was down, while the precious metals shot to short term highs. Crude oil for March delivery were down $2.58, to $34.93; natural gas was off 22 cents, to $4.22, and wholesale unleaded gas closed at $1.11, begging the question as to how most consumers are paying roughly $2.00 at the pump. Look for another record quarter for the oil companies.
Gold gained $25.30, to $967.50. Silver broke 39 cents higher, to $14.01. With deflation clearly the issue, one has to wonder how far the bulls will push the metals. They are, after all, investment hedges - primarily against inflation - but commodities at heart.
Investors find themselves at a critical crossroad at the open tomorrow. Considering that only the Dow has retraced its low, it should be a pretty safe bet that all indices are heading lower in the short term.
Want to know why Wal-Mart was the only Dow component to show a gain on the day? Watch the video below:
Friday, February 13, 2009
Got Stocks? Too Bad!
Some days are better than others, and Friday, being the end of the work week - despite being the unlucky 13th - is generally better than most. Wall Streeters, however, must be leaving their posts with sullen feelings, as the stock market took another one on the chin.
For those keeping score, the major indices - Dow, NASDAQ, S&P 500 and NYSE Composite - all fell this week, marking the 5th weekly loss against just one weekly gain - last week.
For the week, the Dow lost 420 points. The NASDAQ was down 57. The S&P finished 41 points lower and the NYSE Composite was down 268 points. Not very pretty, and not likely to improve much in the coming weeks and months. While some may point out that stocks are generally cheap (some are, most aren't, and besides, it's a question of value, which is relative), and the market is oversold, there is still unfinished business on the downside.
It's likely that investors are scared silly of making significant investments at this point in time, being that the political condition is as unstable and the nation's finances. The banks continue to be at the center of the storm, and every day that passes that they are not brought under the bright light of scrutiny is a day lost to the US economy, and to the global financial system as well.
As many as eight major banking outfits are technically insolvent - and you don't have to ask me, just try Nobel Prize winner Paul Krugman:
So there you have it. The malinvestments made by these banks have to be written down and if the banks don't have sufficient assets to cover their losses, like any other business, they will be forced to liquidate or reorganize. That is their fate, and the sooner it gets done, the better.
Dow 7,850.41, -82.35 (1.04%)
NASDAQ 1,534.36, -7.35 (0.48%)
S&P 500 826.84, -8.35 (1.00%)
NYSE Compos 5,206.76, -49.69 (0.95%)
Despite a near total absence of corporate news or economic reports (the University of Michigan reading of consumer confidence fell in at 56.2, down from 61.2 last month), the public is clearly displeased and traders are feeling the pinch.
On the day, internals were in line with headline numbers, as declining issues outdid advancers, 3629-2862, an expansion of the margin. New lows continued their 15+ month-long streak of beating out new highs, 201-19. Volume was on the light side, for a Friday.
NYSE Volume 1,241,224,000
NASDAQ Volume 2,022,550,000
Commodities were all over the map, with crude oil more than 10% higher, up $3.53, to $37.51. Gold gave back some recent gains, losing $7.00, to $942.20, though silver continued to rise, up another 12 cents, to $13.63, currently above our preferred buying range.
As mentioned previous in posts past, the eventual unwind to Dow 7550 might take six days or six months. We don't know for sure - nobody does - but we're certain that it will happen. The eventual fall will likely be tied to some event, such as the shuttering of Bank of America or some other plausible, but still shocking, news.
As I have personally been out of the market for about four months, including not even playing any options, the time seems to be coming for first a downdraft, and then a possible short-term buying opportunity. As sure as the Dow will test 7550, it will also either bounce off there, establishing a long-sought-after bottom, or it will go even lower. I am of the opinion that the latter is more likely, with 6600 as a final resting place, though I have heard some analysts saying the Industrials could eventually hit the 4000 range.
It's all speculation, so keep your powder dry.
For those keeping score, the major indices - Dow, NASDAQ, S&P 500 and NYSE Composite - all fell this week, marking the 5th weekly loss against just one weekly gain - last week.
For the week, the Dow lost 420 points. The NASDAQ was down 57. The S&P finished 41 points lower and the NYSE Composite was down 268 points. Not very pretty, and not likely to improve much in the coming weeks and months. While some may point out that stocks are generally cheap (some are, most aren't, and besides, it's a question of value, which is relative), and the market is oversold, there is still unfinished business on the downside.
It's likely that investors are scared silly of making significant investments at this point in time, being that the political condition is as unstable and the nation's finances. The banks continue to be at the center of the storm, and every day that passes that they are not brought under the bright light of scrutiny is a day lost to the US economy, and to the global financial system as well.
As many as eight major banking outfits are technically insolvent - and you don't have to ask me, just try Nobel Prize winner Paul Krugman:
The problem is not toxic assets. The problem is that financial institutions have lost a lot of money and many of the big ones, if they are not actually insolvent, are very close.
So there you have it. The malinvestments made by these banks have to be written down and if the banks don't have sufficient assets to cover their losses, like any other business, they will be forced to liquidate or reorganize. That is their fate, and the sooner it gets done, the better.
Dow 7,850.41, -82.35 (1.04%)
NASDAQ 1,534.36, -7.35 (0.48%)
S&P 500 826.84, -8.35 (1.00%)
NYSE Compos 5,206.76, -49.69 (0.95%)
Despite a near total absence of corporate news or economic reports (the University of Michigan reading of consumer confidence fell in at 56.2, down from 61.2 last month), the public is clearly displeased and traders are feeling the pinch.
On the day, internals were in line with headline numbers, as declining issues outdid advancers, 3629-2862, an expansion of the margin. New lows continued their 15+ month-long streak of beating out new highs, 201-19. Volume was on the light side, for a Friday.
NYSE Volume 1,241,224,000
NASDAQ Volume 2,022,550,000
Commodities were all over the map, with crude oil more than 10% higher, up $3.53, to $37.51. Gold gave back some recent gains, losing $7.00, to $942.20, though silver continued to rise, up another 12 cents, to $13.63, currently above our preferred buying range.
As mentioned previous in posts past, the eventual unwind to Dow 7550 might take six days or six months. We don't know for sure - nobody does - but we're certain that it will happen. The eventual fall will likely be tied to some event, such as the shuttering of Bank of America or some other plausible, but still shocking, news.
As I have personally been out of the market for about four months, including not even playing any options, the time seems to be coming for first a downdraft, and then a possible short-term buying opportunity. As sure as the Dow will test 7550, it will also either bounce off there, establishing a long-sought-after bottom, or it will go even lower. I am of the opinion that the latter is more likely, with 6600 as a final resting place, though I have heard some analysts saying the Industrials could eventually hit the 4000 range.
It's all speculation, so keep your powder dry.
Thursday, February 12, 2009
The Dangers of Fraudulent Behavior
Throughout most of the Thursday session, markets were substantially lower for no good reason other than that stocks are still overvalued and too risky right now for the majority of investors.
Right at 3:00 pm, however, it was as though Moses had parted the Red Sea and the enslaved people were freed. The Dow had just broken below 7700 for the first time since November 21, but it would not stay down long. (see image at right)
Like Rocky rising from the canvas, the Dow Jones Industrials staged somewhat of a "miracle" recovery, finishing at 7932.76, easily the best level of the day and a solid 240 points higher in just the last hour of trading.
Hallelujah! Reuters is giving credit to the Obama administration for the rally, citing his sketchy plans to help homeowners.
The real headline - instead of Reuters' tag: S&P and NASDAQ rise after mortgage plan news - should have been "stocks higher as day-trading Wall Street wheedlers cover their shorts."
My headline is probably closer to the truth. Hilary Kramer (left), a frequent guest on PBS "Nightly Business Report" said, during her appearance on the February 11 show, that her most profitable trades of late were short term buys, which she would be out of in less than "48 hours." If Wall Street professionals are day-trading (which is trading, not investing) then what does that say of US equity markets?It says quite a bit, but clearly expresses an understanding that they are no place for actual long-term investments. Today points up what many people suspect. That Wall Street is becoming even more of an inside game than ever before. The bankers who testified to congress yesterday didn't reveal anything about what or how they were doing internally. Traders won't normally tell either, though one must respect Ms. Kramer's candid behavior on a national financial show.
In any case, we should all be used to substantial bear market rallies appearing out of nowhere for no reason. Today was such a case. In days ahead, expect the losses to resume because hitting 7700 and bouncing off it is not a retest of the November 20 lows - not even close.
It may take six months or six days, but those bottoms must be tested, and they will. No significant bottom has occurred in this market and for good reason: we haven't seen the worst of this recession yet.
Dow 7,932.76, -6.77 (0.09%)
NASDAQ 1,541.71, +11.21 (0.73%)
S&P 500 835.19, +1.45 (0.17%)
NYSE Composite 5,256.45, +3.77 (0.07%)
Faced with a market such as this, individual traders must use their own judgment. The smartest among us are out completely, having moved into the safety of money markets and, in my case, heavily into silver (Since silver broke through 13.50 yesterday, I am temporarily out, awaiting the next buying dip.).
If you must be in play, Kramer's advice is a gem of unusual clarity. In and out is the only way to play.
On the day, there were some interesting economic numbers released, including initial estimates of retail sales for January, which tallied a 1% increase over December, which, in itself, is somewhat of a shocker. In other words, people bought more after the holidays (January) than before or during them (December). Of course, the US Census Bureau's numbers are "adjusted for seasonal variation and holiday and trading-day differences, but not for price changes..."
Well, that's a mouthful upon which I won't bite. Never mind that "Total sales for the November 2008 through January 2009 period were down 9.5 percent (±0.5%) from the same period a year ago."
New unemployment claims were significantly higher, at 623,000, which alone could have accounted for the 200+ point drop on the Dow, that is, until manic buying took hold.
Our trusty internal indicators told a vastly different story. There were more declining issues than advancing, 3319-3050. New lows were 321, compared to just 19 new highs. Volume was quite high, especially on the NASDAQ, not unusual considering the overall volatility.
NYSE Volume 1,480,256,000
NASDAQ Volume 2,470,079,000
Commodities, less prone to manipulation and political head fakes acted more rationally. Oil fell $1.96, to $33.98, its lowest level since mid-December.
Gold's rapid rally stalled slightly, gaining $4.70, to $949.20, a gain much smaller than those of the past few days. Silver dipped a penny, to $3.51.
Congress was still diddling around with the banking fix and the stimulus package, though those two major pieces of legislation/regulation are quickly becoming back burner issues. Stocks are supposed to rise and fall on fundamentals, earnings, profit, not politics, though that is what currently seems to be moving markets. It's a condition which cannot last long before becoming a very unhealthy environment.
Wednesday, February 11, 2009
Wall Street Still Waiting on Washington
Markets were mildly optimistic on Wednesday, awaiting word from Washington on the proposed $800 billion stimulus bill in Senate-House negotiations, which appeared close to a deal.
Having investors focus on anything other than issues regarding US banking interests was likely preferable, following yesterday's massive sell-off on the heels of Treasury Secretary Timothy Geithner's sketchy bank plan announcement.
Following the initial shock, players in the financial field are beginning to flesh out possible scenarios, each of them fraught with peril as economists delve into the unknown. Preeminent are the individual balance sheets and books of the banks in question, primarily bank of America and Citigroup, the two which seem to be most at risk, though the books of Wells Fargo, JP Morgan Chase and others will surely require the close scrutiny of government fixers before any steps toward a working solution are attempted.
Like an alcoholic with serious addiction issues the major money center banks have not yet taken the serious step of actually disclosing the size of their losses and may never do so, publicly, as the sheer size of the numbers would panic most ordinary people. It's essential to any kind of recovery that the banks confess their shortfalls to the government, so that an appropriate solution can be delivered.
As for the bank plan being devised at Treasury and the Fed, there is some agreement, that, considering the broad outlines, banks will be merged and/or downsized in coming months.
Trading in very narrow ranges, all of the major indices finished on the upside, though only marginally. Much of the trade was tied to hope for quick passage of the stimulus bill or recovery from yesterday's drama. As for a dead cat bounce, today's action barely merited notice, though most traders seemed relieved that the markets didn't devolve into indiscriminate selling.
Dow 7,939.53, +50.65 (0.64%)
NASDAQ 1,530.50, +5.77 (0.38%)
S&P 500 833.74, +6.58 (0.80%)
NYSE Composite 5,252.65, +37.94 (0.73%)
Much of the bounce-back on the Dow was due to the financials, as Citigroup (C) and Bank of America (BAC) each rose by more than 7%, and JP Morgan, another Dow component, lifted to a 4% higher close.
Internally, the market sent a mixed message, one to which traders have become accustomed over the past 18 months. Advancing issues outnumbered decliners, 3669-2769, though new lows sailed past new lows, 232-14, increasing by both raw number and the overall divergence.
NYSE Volume 5,977,889,500
NASDAQ Volume 2,206,760,750
Crude futures took a severe hit after US inventories were reported to be close to 16-year highs. Oil for March delivery fell $1.61, to $35.94.
Gold finished with strong gains for the second straight day, as the flight to safety continues. Gold was up $30.50, to $944.50, with the magic $1000 mark clearly in sight. Silver also showed strong gains, picking up 39 cents to finish at $13.52 in New York.
In yet more good news for consumers, natural gas lost a penny and all food stock futures were lower. After Citigroup analysts downgraded supermarket chain operators Safeway (SWY) and Kroger (KR) on Tuesday, warning of a protracted "price war," shoppers should expect stable to lower prices on grocers' shelves over the near term.
Considering the dark cloud over the stock markets and the number of layoffs occurring in the past few months, cheaper food and fuel are providing the silver lining.
Having investors focus on anything other than issues regarding US banking interests was likely preferable, following yesterday's massive sell-off on the heels of Treasury Secretary Timothy Geithner's sketchy bank plan announcement.
Following the initial shock, players in the financial field are beginning to flesh out possible scenarios, each of them fraught with peril as economists delve into the unknown. Preeminent are the individual balance sheets and books of the banks in question, primarily bank of America and Citigroup, the two which seem to be most at risk, though the books of Wells Fargo, JP Morgan Chase and others will surely require the close scrutiny of government fixers before any steps toward a working solution are attempted.
Like an alcoholic with serious addiction issues the major money center banks have not yet taken the serious step of actually disclosing the size of their losses and may never do so, publicly, as the sheer size of the numbers would panic most ordinary people. It's essential to any kind of recovery that the banks confess their shortfalls to the government, so that an appropriate solution can be delivered.
As for the bank plan being devised at Treasury and the Fed, there is some agreement, that, considering the broad outlines, banks will be merged and/or downsized in coming months.
Trading in very narrow ranges, all of the major indices finished on the upside, though only marginally. Much of the trade was tied to hope for quick passage of the stimulus bill or recovery from yesterday's drama. As for a dead cat bounce, today's action barely merited notice, though most traders seemed relieved that the markets didn't devolve into indiscriminate selling.
Dow 7,939.53, +50.65 (0.64%)
NASDAQ 1,530.50, +5.77 (0.38%)
S&P 500 833.74, +6.58 (0.80%)
NYSE Composite 5,252.65, +37.94 (0.73%)
Much of the bounce-back on the Dow was due to the financials, as Citigroup (C) and Bank of America (BAC) each rose by more than 7%, and JP Morgan, another Dow component, lifted to a 4% higher close.
Internally, the market sent a mixed message, one to which traders have become accustomed over the past 18 months. Advancing issues outnumbered decliners, 3669-2769, though new lows sailed past new lows, 232-14, increasing by both raw number and the overall divergence.
NYSE Volume 5,977,889,500
NASDAQ Volume 2,206,760,750
Crude futures took a severe hit after US inventories were reported to be close to 16-year highs. Oil for March delivery fell $1.61, to $35.94.
Gold finished with strong gains for the second straight day, as the flight to safety continues. Gold was up $30.50, to $944.50, with the magic $1000 mark clearly in sight. Silver also showed strong gains, picking up 39 cents to finish at $13.52 in New York.
In yet more good news for consumers, natural gas lost a penny and all food stock futures were lower. After Citigroup analysts downgraded supermarket chain operators Safeway (SWY) and Kroger (KR) on Tuesday, warning of a protracted "price war," shoppers should expect stable to lower prices on grocers' shelves over the near term.
Considering the dark cloud over the stock markets and the number of layoffs occurring in the past few months, cheaper food and fuel are providing the silver lining.
Tuesday, February 10, 2009
Geithner's Wall Street Cram-Down
It was pretty evident that Wall Street didn't like what Treasury Secretary Timothy Geithner was telling them when he began outlining the details of TARP II, the $350 billion Obama administration's side of the original $700 billion plan approved in October of 2008.
Stocks were already trading lower when Geithner stepped to the mic, but they really tanked as he drilled out scant details of the government's plan. The Dow was down about 45 points when he started speaking at 11:00 am. By the time he was finished, just a half hour later, the blue chip index was off nearly 300. Matters proceeded to become materially worse from there. The Dow was down more than 400 points before a last-gasp rally trimmed the losses by about 40 points in the final 15 minutes.
Dow 7,888.88, -381.99 (4.62%)
NASDAQ 1,524.73, -66.83 (4.20%)
S&P 500 827.17, -42.72 (4.91%)
NYSE Composite 5,214.34, -265.54 (4.85%)
Some of the more vocal Wall Street banking crowd are complaining that Geithner's plan - which reportedly has provisions for the assumption of some of the banks' toxic assets by private investors - is short on specifics.
The truth of the matter is that it likely opens the banks in question to too much public scrutiny, as evidenced by the government's new web site, financialstability.gov.
For a glimpse of what's ahead for the Bailout Bunch, the site currently links to Treasury's own Emergency Economic Stabilization Act web site. drilling down just a page reveals, under "Systemically Significantly Failing Institutions" we find reams of info on Bank of America, Goldman Sachs, Morgan Stanley, Citigroup, JP Morgan Chase, Wells Fargo & Co., Bank of New York Mellon, State Street, Merrill Lynch, AIG, plus Chrysler, General Motors and GMAC.
How appropriate and sweetly ironic that these banks and businesses are grouped under such a heading. Most, if not all, are already insolvent. Bloggers and economists should have a field day with all the fresh light shining on these cheaters, liars and scoundrels. There's a wealth of information there, much of it which will almost surely facilitate the demise of these failed firms.
Could the government actually be forcing the banks to confess to their excess and the extent of their failures? It sure looks that way, and, if so, it's a great step forward. Wall Street fails to see it that way, but, clue to the clueless, Wall Street isn't America and the fate of 300 million Americans is not inexorably tied to the ups and downs of the Dow Jones Industrials.
Main Street may finally be catching a break as the banks are forced to come clean, which means that a good number of them will be forced into bankruptcy and/or liquidation, the key step in ridding the market of malinvestments and failed institutions.
Could it be that Secretary Geithner, under the thumb of President Obama, has finally gotten religion and intends to actually correct the mess that he was already a party to? Could be. Obama's sincerity and forthrightness was on display just last night at his first press conference when he left the door a bit ajar in his response to a reporter's question about investigating former administration officials.
His response to a question about Senator Patrick Leahy's calling for a "truth commission" was decidedly grey-area, as the President said much to the affect that while he preferred to "look forward" he would not block investigative efforts. Between those comments and the Geithner cram-down on Wall Street, maybe real healing in America can begin.
This writer honestly hasn't felt this good about a serious market tumble since the dot-com bust, the key being Geithner's fairly obvious signal that the rules have changed and the hand-outs and free rides are now relics of the past.
Advancing issues were absolutely overwhelmed by decliners in the broadest selling since November. Losers led gainers, 5405-1145, a nearly 5-1 edge. New lows continued to strengthen ahead of new highs, 203-19. A major part of the story was volume, which was very strong, indicating that this bust was the real deal.
NYSE Volume 1,757,078,000
NASDAQ Volume 2,473,252,000
Financial stocks took a beating, especially the most egregious offenders. Bank of America (BAC) lost 1.33 to close at 5.56 (-19.30%). There was false hope recently as BofA rallied from below $4 to above $6, a level at which major funds could still participate. It now looks to fall below $5 again, signaling a continuance of the classic death spiral.
Ironically, this stock looks very much like Countrywide did in January of 2008, after Bank of America had assumed most of the company's assets. Countrywide eventually was fully assumed by Bank of America. Much of the same bad debt which killed that company are now crushing CEO Ken Lewis' company. Bank of America has been insolvent for quite some time and it will be interesting to watch the continuing saga of what was once America's largest banking interest.
Citigroup (C), another of the walking dead, was hammered 0.60, to 3.35 (-15.19). This company's future may be numbered in weeks rather than months.
Goldman Sachs (GS) was hard hit, dropping 7.49, to 90.40 (-7.65%). Morgan Stanley (MS)lost 2.82, to 20.79 (-11.95). JP Morgan Chase fell 2.66, to 24.62 (-9.75).
Commodities were mostly mixed with oil down substantially, losing 2.01, closing at $37.55, a three-week low. The metals were moving in the opposite directed, hurriedly. Gold shot up 21.40, to $914.20. Silver gained 30 cents, to 13.13.
The precious metals prices are signaling another flight to safety. Clearly, equities are not the place to be now, as they haven't been for the past 18 months, and they still won't be for some time even though today's decline could be interpreted as the beginning of the recovery. The dollar was up sharply against other currencies.
While our own corrupt bankers and wheedlers express themselves with outcries of fear and panic, smart money is on the greenback and gold, a combination that may not seem plausible at first, though it's better understood when seen in the light of a basic turnover of power. It's clear that the Obama administration is not going to tolerate much less than complete transparency. THAT is a very positive development.
Silver remains my #1 investment. On the other hand, opportunities may begin to emerge in black market tobacco and stinging race and sports fixers, the ultimate revenge play.
Today's losses were surely not the last, as the Dow closed at its lowest level since November 20 of last year and is also the first close since then below 7900. Wall Street is in serious jeopardy of breaking apart at the seams. Another precipitous move lower could be in the cards as the market must retest 7550 on the Dow, though that move actually seems a foregone conclusion after today.
It was a poor day for Wall Street, but a darned good one for the United States of America.
Stocks were already trading lower when Geithner stepped to the mic, but they really tanked as he drilled out scant details of the government's plan. The Dow was down about 45 points when he started speaking at 11:00 am. By the time he was finished, just a half hour later, the blue chip index was off nearly 300. Matters proceeded to become materially worse from there. The Dow was down more than 400 points before a last-gasp rally trimmed the losses by about 40 points in the final 15 minutes.
Dow 7,888.88, -381.99 (4.62%)
NASDAQ 1,524.73, -66.83 (4.20%)
S&P 500 827.17, -42.72 (4.91%)
NYSE Composite 5,214.34, -265.54 (4.85%)
Some of the more vocal Wall Street banking crowd are complaining that Geithner's plan - which reportedly has provisions for the assumption of some of the banks' toxic assets by private investors - is short on specifics.
The truth of the matter is that it likely opens the banks in question to too much public scrutiny, as evidenced by the government's new web site, financialstability.gov.
For a glimpse of what's ahead for the Bailout Bunch, the site currently links to Treasury's own Emergency Economic Stabilization Act web site. drilling down just a page reveals, under "Systemically Significantly Failing Institutions" we find reams of info on Bank of America, Goldman Sachs, Morgan Stanley, Citigroup, JP Morgan Chase, Wells Fargo & Co., Bank of New York Mellon, State Street, Merrill Lynch, AIG, plus Chrysler, General Motors and GMAC.
How appropriate and sweetly ironic that these banks and businesses are grouped under such a heading. Most, if not all, are already insolvent. Bloggers and economists should have a field day with all the fresh light shining on these cheaters, liars and scoundrels. There's a wealth of information there, much of it which will almost surely facilitate the demise of these failed firms.
Could the government actually be forcing the banks to confess to their excess and the extent of their failures? It sure looks that way, and, if so, it's a great step forward. Wall Street fails to see it that way, but, clue to the clueless, Wall Street isn't America and the fate of 300 million Americans is not inexorably tied to the ups and downs of the Dow Jones Industrials.
Main Street may finally be catching a break as the banks are forced to come clean, which means that a good number of them will be forced into bankruptcy and/or liquidation, the key step in ridding the market of malinvestments and failed institutions.
Could it be that Secretary Geithner, under the thumb of President Obama, has finally gotten religion and intends to actually correct the mess that he was already a party to? Could be. Obama's sincerity and forthrightness was on display just last night at his first press conference when he left the door a bit ajar in his response to a reporter's question about investigating former administration officials.
His response to a question about Senator Patrick Leahy's calling for a "truth commission" was decidedly grey-area, as the President said much to the affect that while he preferred to "look forward" he would not block investigative efforts. Between those comments and the Geithner cram-down on Wall Street, maybe real healing in America can begin.
This writer honestly hasn't felt this good about a serious market tumble since the dot-com bust, the key being Geithner's fairly obvious signal that the rules have changed and the hand-outs and free rides are now relics of the past.
Advancing issues were absolutely overwhelmed by decliners in the broadest selling since November. Losers led gainers, 5405-1145, a nearly 5-1 edge. New lows continued to strengthen ahead of new highs, 203-19. A major part of the story was volume, which was very strong, indicating that this bust was the real deal.
NYSE Volume 1,757,078,000
NASDAQ Volume 2,473,252,000
Financial stocks took a beating, especially the most egregious offenders. Bank of America (BAC) lost 1.33 to close at 5.56 (-19.30%). There was false hope recently as BofA rallied from below $4 to above $6, a level at which major funds could still participate. It now looks to fall below $5 again, signaling a continuance of the classic death spiral.
Ironically, this stock looks very much like Countrywide did in January of 2008, after Bank of America had assumed most of the company's assets. Countrywide eventually was fully assumed by Bank of America. Much of the same bad debt which killed that company are now crushing CEO Ken Lewis' company. Bank of America has been insolvent for quite some time and it will be interesting to watch the continuing saga of what was once America's largest banking interest.
Citigroup (C), another of the walking dead, was hammered 0.60, to 3.35 (-15.19). This company's future may be numbered in weeks rather than months.
Goldman Sachs (GS) was hard hit, dropping 7.49, to 90.40 (-7.65%). Morgan Stanley (MS)lost 2.82, to 20.79 (-11.95). JP Morgan Chase fell 2.66, to 24.62 (-9.75).
Commodities were mostly mixed with oil down substantially, losing 2.01, closing at $37.55, a three-week low. The metals were moving in the opposite directed, hurriedly. Gold shot up 21.40, to $914.20. Silver gained 30 cents, to 13.13.
The precious metals prices are signaling another flight to safety. Clearly, equities are not the place to be now, as they haven't been for the past 18 months, and they still won't be for some time even though today's decline could be interpreted as the beginning of the recovery. The dollar was up sharply against other currencies.
While our own corrupt bankers and wheedlers express themselves with outcries of fear and panic, smart money is on the greenback and gold, a combination that may not seem plausible at first, though it's better understood when seen in the light of a basic turnover of power. It's clear that the Obama administration is not going to tolerate much less than complete transparency. THAT is a very positive development.
Silver remains my #1 investment. On the other hand, opportunities may begin to emerge in black market tobacco and stinging race and sports fixers, the ultimate revenge play.
Today's losses were surely not the last, as the Dow closed at its lowest level since November 20 of last year and is also the first close since then below 7900. Wall Street is in serious jeopardy of breaking apart at the seams. Another precipitous move lower could be in the cards as the market must retest 7550 on the Dow, though that move actually seems a foregone conclusion after today.
It was a poor day for Wall Street, but a darned good one for the United States of America.
Monday, February 9, 2009
Markets Flatline Awaiting Stimulus
Stocks traded in narrow ranges on the major indices Monday as investors awaited congressional delegations to reconcile differences in the Senate and House versions of the massive $800 billion government stimulus bill.
While Washington fiddles, Wall Street diddles, indeed. The Dow barely surpassed a 100-point full-session range. The S&P 500 never moved more than 7-points off of no change, finishing with a minimal gain of 1.29, joining the NYSE on the upside, while the Dow and NASDAQ ended lower.
Dow 8,270.95, -9.64 (0.12%)
NASDAQ 1,591.56, -0.15 (0.01%)
S&P 500 869.89, +1.29 (0.15%)
NYSE Composite 5,479.86, +4.58 (0.08%)
The imperfect storm included a lack of corporate reports, scarce economic news and a delay in the highly-anticipated "TARP II" bailout plan for major financial firms.
Lethargic conditions resulted in a severe lack of volume and volatility. Maybe everybody just needed a break from the steady salvo of bad news, inquisition and recrimination. Word is out that the global economy is quitting, the question is over haw bad it will become and whether any government plan can stem the tide of defaults, layoffs and deflation.
On the day, advancing and declining issues were virtually split, with advancers ahead, 3279-3221. New lows continued to outnumber new highs, 115-19. The volume figures, as mentioned, were rather anemic.
NYSE Volume 1,257,726,000
NASDAQ Volume 1,912,234,000
The major tracking commodities deflated as crude oil closed near its session lows at $39.56 per barrel, down 61 cents. Gold fell $21.50, to $892.80, with silver slipping 23 cents, ending at $12.83 the ounce in New York.
There was so little to report on today, even I am at a loss for words.
While Washington fiddles, Wall Street diddles, indeed. The Dow barely surpassed a 100-point full-session range. The S&P 500 never moved more than 7-points off of no change, finishing with a minimal gain of 1.29, joining the NYSE on the upside, while the Dow and NASDAQ ended lower.
Dow 8,270.95, -9.64 (0.12%)
NASDAQ 1,591.56, -0.15 (0.01%)
S&P 500 869.89, +1.29 (0.15%)
NYSE Composite 5,479.86, +4.58 (0.08%)
The imperfect storm included a lack of corporate reports, scarce economic news and a delay in the highly-anticipated "TARP II" bailout plan for major financial firms.
Lethargic conditions resulted in a severe lack of volume and volatility. Maybe everybody just needed a break from the steady salvo of bad news, inquisition and recrimination. Word is out that the global economy is quitting, the question is over haw bad it will become and whether any government plan can stem the tide of defaults, layoffs and deflation.
On the day, advancing and declining issues were virtually split, with advancers ahead, 3279-3221. New lows continued to outnumber new highs, 115-19. The volume figures, as mentioned, were rather anemic.
NYSE Volume 1,257,726,000
NASDAQ Volume 1,912,234,000
The major tracking commodities deflated as crude oil closed near its session lows at $39.56 per barrel, down 61 cents. Gold fell $21.50, to $892.80, with silver slipping 23 cents, ending at $12.83 the ounce in New York.
There was so little to report on today, even I am at a loss for words.
Friday, February 6, 2009
Bear Market Rally Like Crack Cocaine
2:35 pm : The stock market sports strong gains near session highs. Beaten down industry groups top the leader board -- homebuilding (+16%), diversified financial services (+14%), regional banks (+14%), diversified banks (+12%), auto parts and equipment makers (+12%).
The above quote is from briefing.com, noted as the markets approached the highs of the day on Friday. As I noted earlier today, the market has absolutely rejected the obvious, continuing stream of bad news, including January's horrific jobs numbers (-598,000), released prior to the market's opening bell by the Bureau of Labor Statistics (BLS).
So, is this "irrational exuberance?" A little of that. The mainstream-obviated financial press is attributing the rise in equities to anticipation of congress passing a stimulus bill, presumably by tonight. There's probably a little of that, too, but the truth probably lies somewhere between the PPT and the fact that Bank of America stock had fallen below $5.00 per share on Wednesday, and our great and glorious financial leaders could not stomach the thought that investment and pension funds would not - by charter - be able to throw more cash down that rat hole of a "bad bank." Throw in a teaspoon of short-covering and viola! Bear market rally.
Rallies like this, in the midst of a serious recession, are like crack cocaine: a great rush, but it doesn't last and the crash is difficult. We've all seen them before and, judging by past experience, this one is just a lot of noise, indicative of nothing in particular except for the assertion that investors can be herded more readily than cats.
Bank of America was the among the biggest winners of the day, gaining 31% at one point of the activities. The stock finished the session with a nifty 1.29 point gain, closing at 6.13, up 26.65%.
But take a gander at those industry groups leading the rally. Banks? Homebuilders? Auto Parts? Aren't these the same companies needing bailouts and TARPs? This was another in a series of well-orchestrated pumping by the "invisible hand" of government and financial firms afraid of losing their grip on the American psyche. Naturally, jacking the stock markets is only a temporary solution.
Another irony of our day is the news that many of the banks and institutions receiving TARP funds - now that severe restrictions have been placed upon them, like limits on executive compensation - banks are turning away from government largess and Bank of America's CEO, Ken Lewis (left), says his firm won't need any more.Is Lewis to be believed? Probably not. Bank of America is technically insolvent. Besides, his bank has already received $45 billion in direct funding, plus another $118 billion in government loan guarantees. Let's hope BofA doesn't need any more money.
Here's some more proof of the extent of insider meddling in today's (and every day's) trading. Look at how closely the indices tracked by percentage gain. Absolute lock-step. Unusually aligned.
Dow 8,280.59, +217.52 (2.70%)
NASDAQ 1,591.71, +45.47 (2.94%)
S&P 500 868.60, +22.75 (2.69%)
NYSE Composite 5,475.28, +149.27 (2.80%)
To say that today's gains are illusory or fantastical might be putting too fine a point on it, so I'll patiently wait until stocks on the Dow (of which every single one was higher today) revert to the norm at 8149, pulled down by the absolute weight and unshakable might of pure market dynamics. The Dow can only go so far for so long before retesting the lows set last November. How far and how long you ask? A few hundred points (maybe a top at 8600, though that's doubtful) and about another month at the outside. Sooner or later reality rears it's pretty head and investors head elsewhere, profits in hand.
On the day, advancing issues hammered decliners, by a heavy margin, 5137-1446. New lows remained atop new highs, 144-22. Volume, as it was yesterday, was strong, not surprising, considering how much money went into bidding up stocks that should have been going down.
NYSE Volume 1,611,600,000
NASDAQ Volume 2,429,589,000
Commodities continued under some pressure, which is normal. Oil futures finished a volatile session down $1.00, at $40.17. Gold barely budged, picking up 10 cents to $914.30. Silver's advance was the sharpest of all, up 41 cents, to a multi-month high of $13.16.
The stock indices all registered gains for the week, snapping four-week losing streaks and posting the first weekly gain of 2009. Direction is still down, though point-and-figure chartists will note a reversal here. Considering the depth of economic despair the country and globe is encountering, this doesn't seem to be much of a sustainable trend.
SPECIAL: Markets Off Course, Major Correction Coming
This is a special report on the unusual action in US equity markets this morning. Our usual recap will be posted around 5:00 today.
Last night, well after markets closed, News Corp. (NWSA) - the media conglomerate controlled by Rupert Murdoch - reported a loss of $6.4 billion in its most recent quarter.
This morning, paper and pulp producer Weyerhaeuser (WY) posted a 4th quarter loss of more than $1.21 billion, or $5.73 a share, from a loss of $63 million, or 30 cents a share, a year ago.
An hour prior to the opening bell, the Bureau of Labor Statistics reported job losses of 598,000 in January and a jump in the "official" unemployment rate to 7.6%.
So, naturally, at the open, the major US equity indices went straight UP. What's that you say? Doesn't make any sense?
Well, you're right. As I mentioned briefly yesterday, and the day before, and many times prior to that, US MARKETS ARE RIGGED.
As I write, I am watching stocks race towards the sky, with the Dow up 180 points, the NASDAQ higher by 33 and the S&P ahead by 17.
Speaking of the S&P, Standard & Poor's Index Services reports that it expects dividends for components of its S&P 500 Index to drop 13.3% this year. More bad news, right?
Stocks are higher, based on absolutely nothing but hype, not even hope! Zounds!
As a bonus, here's Peter Schiff on why the stimulus package is going to make things worse:
And...
- Secretary of State Thomas Jefferson
Anyhow, look for stocks to stop rallying on this semi-short squeeze and tank below 7500 in the near future. I'll be back later to report on how the rest of the day went.
Last night, well after markets closed, News Corp. (NWSA) - the media conglomerate controlled by Rupert Murdoch - reported a loss of $6.4 billion in its most recent quarter.
This morning, paper and pulp producer Weyerhaeuser (WY) posted a 4th quarter loss of more than $1.21 billion, or $5.73 a share, from a loss of $63 million, or 30 cents a share, a year ago.
An hour prior to the opening bell, the Bureau of Labor Statistics reported job losses of 598,000 in January and a jump in the "official" unemployment rate to 7.6%.
So, naturally, at the open, the major US equity indices went straight UP. What's that you say? Doesn't make any sense?
Well, you're right. As I mentioned briefly yesterday, and the day before, and many times prior to that, US MARKETS ARE RIGGED.
As I write, I am watching stocks race towards the sky, with the Dow up 180 points, the NASDAQ higher by 33 and the S&P ahead by 17.
Speaking of the S&P, Standard & Poor's Index Services reports that it expects dividends for components of its S&P 500 Index to drop 13.3% this year. More bad news, right?
Stocks are higher, based on absolutely nothing but hype, not even hope! Zounds!
As a bonus, here's Peter Schiff on why the stimulus package is going to make things worse:
And...
"If the American people ever allow the banks to control the issuance of their currency.. the banks and corporations that will grow up around them will deprive the people of all property, until their children wake up homeless on the continent their fathers conquered."
- Secretary of State Thomas Jefferson
Anyhow, look for stocks to stop rallying on this semi-short squeeze and tank below 7500 in the near future. I'll be back later to report on how the rest of the day went.
Thursday, February 5, 2009
Bad News Rally? Really?
Once the opening bell rang, investors knew what to do after seeing the latest round of initial unemployment claims coming in at a record number, 626,000. All of the major indices dropped right out of the gate, building losses until right around 10:30 am, with the usual suspects, banks and related financial firms, leading the way.
Adding to the early Thursday thumping was the 4th quarter report from Cisco (CSCO), along with a very disappointing outlook for Q1 of 2009.
Additionally, a slew of retailers reported same-store sales falling in the range of 15-25% in January. Overall, there wasn't much good news about.
But, then word hit the street that “mark-to-market” accounting rules might be suspended to provide additional relief to banks and financial institutions. In other words, banks would be able to hide bad debts deep in the bowels of their books. Fine. Dandy. More phony accounting should be just the elixir to pull the nation out of its deflationary tailspin.
I have a word for what the government has been doing and continues to do regarding the banks. It's called "manipulation."
Massaging the bank's books aren't going to magically make the bad paper go away. Toxic CDO and MBS are bad, plain and simple. Allowing the banks to put them into a tier of liabilities or assets that doesn't realistically reflect their market value only delays the eventual reckoning. It was the suggested "mark to model" accounting, by which the banks were able to conceal their liabilities in the gobbledegook of their accounting which was largely responsible for the entire mess to begin with. Now, the "change agents" in the federal government believe that a return to those failed and false standards will somehow turn the tide.
Rubbish. Absolute garbage and trash. The government has no silver bullet. The answer is to allow the market to function by bankrupting all of the major players (Bank of America, Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley, et. al.) who are INSOLVENT. Instead, the government and Wall Street is conspiring to continue the rape of the American taxpayer by propping up these failed institutions. They are plotting nothing less than the destruction of the United States of America.
So, the market soars on the news. The Dow, in particular, turned a 110-point loss at 10:30 am to a 150-point gain just after noon. The other indices registered similar moves and finished at or near the highs of the day. Not surprisingly, the banking sector was up sharply.
Dow 8,063.07, +106.41 (1.34%)
NASDAQ 1,546.24, +31.19 (2.06%)
S&P 500 845.85, +13.62 (1.64%)
NYSE Composite 5,326.01, +83.26 (1.59%)
So, there you have it. Bad news almost all around, but because the feds offer easier accounting rules, everything is magically worth more today than yesterday. Not only is our government completely off the rails, they are taking all of the money with them through the corrupt, failed banking system. If Americans ever understand the truth rather than accepting the pablum spoon-fed to them daily by the equally-complicit mainstream media, there would be marches and sit-ins in Washington which would make the record crowds at Obama's inauguration look like a high-school picnic - that is, if the American people somehow rediscover their spines.
Of course, most of the American population has been placated by either poverty, the media, handouts (welfare and extended unemployment benefits) or a noxious combination of all three. Largely, the American public is a brain-dead, limp and nearly lifeless non-entity. They don't have a voice in their politics and those who actually understand what's happening are marginalized as kooks or conspirators. Our rights have been gradually stripped away (and not restored by the current administration) to the point at which we barely matter. Congress and the president do as they please. Wall Street openly steals billions of dollars. Americans pay their bills, struggle to make ends meet, try to get by, hundreds of thousands of Kentuckians are still in the dark and cold, recalling images of hurricane Katrina and the aftermath of New Orleans. Sick. Sick Sick.
Tracking the day's trends, advancing issues beat back losers, 4155-1308, but, new lows continued to hold a large edge over new highs, 288-12. Volume was very high, especially at the open (down) and into the close (flat) as the powers at work threw everything they had into the market to prevent the dissipation of the day's gains. The bull-bear struggle from 3:30 to 4:00 pm was monumental, even though the indices barely budged.
NYSE Volume 1,627,892,000
NASDAQ Volume 2,563,955,000
Commodity markets responded as would be expected. Oil rose by 85 cents, to $41.17. Gold was up $12.00, to $914.20; silver advanced another 28 cents, to $12.75.
Naturally, all the efforts of the pumpers and pimps of the market could not overcome the monumental resistance line set up at 8149 on the Dow... not even coming close. Friday morning will prove to be quite interesting. The Bureau of Labor Statistics releases their non-farms payroll report for January at 8:30 am. The consensus is for another loss of 525,000 jobs. ADP has already (on Wednesday) released their independent figure for January at -522,000 jobs for January. Whichever way the BLS decides to massage their figures will decide the line of the day's trade. Anything significantly over their "consensus" figure should cause a decline. Anything at or below the figure will trigger a monster rally. Either way, its the sucker trade of the week, or year, or... well, there have been so many sucker moves lately that it may just fall in line with the rest of them.
Suck it up, America. The oligarchs cannot be inconvenienced.
Adding to the early Thursday thumping was the 4th quarter report from Cisco (CSCO), along with a very disappointing outlook for Q1 of 2009.
Additionally, a slew of retailers reported same-store sales falling in the range of 15-25% in January. Overall, there wasn't much good news about.
But, then word hit the street that “mark-to-market” accounting rules might be suspended to provide additional relief to banks and financial institutions. In other words, banks would be able to hide bad debts deep in the bowels of their books. Fine. Dandy. More phony accounting should be just the elixir to pull the nation out of its deflationary tailspin.
I have a word for what the government has been doing and continues to do regarding the banks. It's called "manipulation."
Massaging the bank's books aren't going to magically make the bad paper go away. Toxic CDO and MBS are bad, plain and simple. Allowing the banks to put them into a tier of liabilities or assets that doesn't realistically reflect their market value only delays the eventual reckoning. It was the suggested "mark to model" accounting, by which the banks were able to conceal their liabilities in the gobbledegook of their accounting which was largely responsible for the entire mess to begin with. Now, the "change agents" in the federal government believe that a return to those failed and false standards will somehow turn the tide.
Rubbish. Absolute garbage and trash. The government has no silver bullet. The answer is to allow the market to function by bankrupting all of the major players (Bank of America, Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley, et. al.) who are INSOLVENT. Instead, the government and Wall Street is conspiring to continue the rape of the American taxpayer by propping up these failed institutions. They are plotting nothing less than the destruction of the United States of America.
So, the market soars on the news. The Dow, in particular, turned a 110-point loss at 10:30 am to a 150-point gain just after noon. The other indices registered similar moves and finished at or near the highs of the day. Not surprisingly, the banking sector was up sharply.
Dow 8,063.07, +106.41 (1.34%)
NASDAQ 1,546.24, +31.19 (2.06%)
S&P 500 845.85, +13.62 (1.64%)
NYSE Composite 5,326.01, +83.26 (1.59%)
So, there you have it. Bad news almost all around, but because the feds offer easier accounting rules, everything is magically worth more today than yesterday. Not only is our government completely off the rails, they are taking all of the money with them through the corrupt, failed banking system. If Americans ever understand the truth rather than accepting the pablum spoon-fed to them daily by the equally-complicit mainstream media, there would be marches and sit-ins in Washington which would make the record crowds at Obama's inauguration look like a high-school picnic - that is, if the American people somehow rediscover their spines.
Of course, most of the American population has been placated by either poverty, the media, handouts (welfare and extended unemployment benefits) or a noxious combination of all three. Largely, the American public is a brain-dead, limp and nearly lifeless non-entity. They don't have a voice in their politics and those who actually understand what's happening are marginalized as kooks or conspirators. Our rights have been gradually stripped away (and not restored by the current administration) to the point at which we barely matter. Congress and the president do as they please. Wall Street openly steals billions of dollars. Americans pay their bills, struggle to make ends meet, try to get by, hundreds of thousands of Kentuckians are still in the dark and cold, recalling images of hurricane Katrina and the aftermath of New Orleans. Sick. Sick Sick.
Tracking the day's trends, advancing issues beat back losers, 4155-1308, but, new lows continued to hold a large edge over new highs, 288-12. Volume was very high, especially at the open (down) and into the close (flat) as the powers at work threw everything they had into the market to prevent the dissipation of the day's gains. The bull-bear struggle from 3:30 to 4:00 pm was monumental, even though the indices barely budged.
NYSE Volume 1,627,892,000
NASDAQ Volume 2,563,955,000
Commodity markets responded as would be expected. Oil rose by 85 cents, to $41.17. Gold was up $12.00, to $914.20; silver advanced another 28 cents, to $12.75.
Naturally, all the efforts of the pumpers and pimps of the market could not overcome the monumental resistance line set up at 8149 on the Dow... not even coming close. Friday morning will prove to be quite interesting. The Bureau of Labor Statistics releases their non-farms payroll report for January at 8:30 am. The consensus is for another loss of 525,000 jobs. ADP has already (on Wednesday) released their independent figure for January at -522,000 jobs for January. Whichever way the BLS decides to massage their figures will decide the line of the day's trade. Anything significantly over their "consensus" figure should cause a decline. Anything at or below the figure will trigger a monster rally. Either way, its the sucker trade of the week, or year, or... well, there have been so many sucker moves lately that it may just fall in line with the rest of them.
Suck it up, America. The oligarchs cannot be inconvenienced.
Wednesday, February 4, 2009
Bye, Bye, Bank of America
There was a rally underway on Wall Street, until, that is, around 10:30 am, when President Obama announced that executive pay for bankers whose institutions receive TARP funds would be capped at $500,000. That's when stocks peaked, eventually losing more than 200 points from top to bottom on the Dow, which was the worst affected of all indices.
Dow 7,956.66, -121.70 (1.51%)
NASDAQ 1,515.05, -1.25 (0.08%)
S&P 500 832.23, -6.28 (0.75%)
NYSE Composite 5,242.75, -25.27 (0.48%)
The blue chips were aided in their descent by 4th quarter earnings reports from Disney (DIS) and Kraft (KFT), in addition to Bank of America (BAC), which reportedly lost 12 investment bankers on the Obama announcement, jumping ship to join Deutsche Bank (DB), which has received no TARP funds nor money from their home, German government.
Among the three big losers on the Dow, Kraft posted a 72% earnings decline year-over-year, losing 9% on the day as traders punished the stock, sending it to 26.13, down 2.61 at the close. Disney suffered through a troubling fiscal first quarter, earning 45 cents a share in the quarter ended Dec. 27, compared with 63 cents a share, in the same quarter a year ago. Disney finished at 19.00, off 1.60, a 7.8% loss.
Bank of America was hit with massive selling, with more than 600 million shares changing hands, almost 4 times the average daily volume. shares fell to 4.60, a 17-year low, off 0.60, a decline of more than 11%. The number of shares trading is significant in that many funds, by charter, cannot maintain positions in stocks valued under $5 per share. The rout of the bank's backers should continue as long as the company's shares remain at depressed levels.
In truth, Bank of America should already have filed for bankruptcy protection as its operations have been underwater for quite some time. Continuing to shovel money into the bottomless pits of BofA and Citigroup, particularly, has been a mistake from the very start. No business is "too big to fail" and pouring taxpayer money into these obviously failed institutions is a monumental blunder on the part of the federal government, more likely to prolong and deepen the financial crisis than repair it.
A very astute rendering of the current economic malaise is offered by Ismael Hossein Zadeh, in "Too Big to Fail:" a Bailout Hoax at counterpunch.org. This article should be required reading for all of our elected federal officials, who, as a group, are poorly prepared to handle any kind of economy, especially one which is in dire straits.
Sadly, most of them will not read it or any other tract on economics, being that, for most of them, their major accomplishments involve using other people's money to land big-time government jobs. Of all the 650 or so congresspeople there is maybe a handful (10 to 20) who really have a grasp for economics of this scale. The rest simply are led by their noses by supposed government "experts" who dictate policy. There's little doubt that the worst enemy of the United States of America does not domicile in Afghan or Pakistani caves, but in tony residences around the Capitol. The lot of them and their predecessors has led America down this path of destruction since 1980 at least. Those currently holding office in congress will certainly finish the job in a smashing manner, impoverishing the nation in a manner never before seen.
As for the president who promised change, little has. Instead, he has surrounded himself with the very same people who are responsible for the whole mess. Yes, I voted for him, thinking he could turn around many of our mistakes, but, thus far, he has been a huge disappointment, favoring massive deficit spending over actual, practical solutions, like cutting the payroll tax, surely the easiest and quickest way to stimulate the overall economy.
Interestingly, and probably not coincidentally, today's morning rally stalled out just above my magic 8149.09 mark, the level which cannot be penetrated before lows are retested. This number is turning out to be a very strong resistance point, one that could endure for months, if not years. The Dow needs to fall further and our economy needs to find a solid footing before advancing in any meaningful way. That, sadly, is also months, or years, away and seemingly getting pushed further along the horizon every day.
The sooner the pols in Washington realize that decentralization of everything from the energy grid to banking to politics is at the heart of recovery, the sooner various parts of the country can begin to function well again. What's interesting and even amusing about this economic era is that the people being damaged the most are, not in any particular order, the rich, Wall Street, and Washington politicians, the last of which is rapidly losing credibility and relevance.
Recovery will begin more on local levels than at the federal. Communities with forward-looking. realistic activists will be better prepared to deal with the downturn and offer solutions for recovery. Those solutions will be more proactive and less involved with government and other macro-style solutions. They are likely to be based on models of sustainability, conservation and localism. The ideas are emerging. Many of them will be featured on this very blog as they become evident.
On the day, market internals confirmed the absolute pummeling the markets took on Wednesday. Declining issues overwhelmed advancers, 3732-2766. New lows expanded their edge over new highs, 235-17. Volume was strong, indicating that the decline is gaining momentum.
NYSE Volume 6,413,953,000
NASDAQ Volume 2,187,395,750
Commodities continue to trade in mixed fashion with oil falling 46 cents to $40.32, while gold gained $9.70, to $902.20, and silver posting a 17 cent gain, to $12.47. This is likely a trend which will continue. Commodities which are used widely - energy and food stocks - should continue to feel the pinch of deflation, while the safety of the precious metals will attract smart money seeking safety. Naturally, when the real effects of government overspending become evident in a weakened dollar, those same commodities should rise, and the metals will go parabolic. That eventuality is likely 2-3 years away, maybe longer.
In the interim, the US and world economies are undergoing a massive shift from globalization to localization. More and more people every day are understanding that their basic needs are not being met by government and ultra-national corporate entities, but by local economies, farms, businesses and people. This could be the beginning of the absolute end of big government in its many layers. From towns and villages all the way up to the federal level, the American public is increasingly weary of being overtaxed and underserved, harassed and obligated to the very institutions which are supposed to support and protect us.
Wall Street and Washington has screwed us all the way down. The American people will fix this on the way up, but, like a drunk with a problem, the first step is bottoming out, and we haven't done that yet. Mostly, we are still in denial.
More tomorrow.
Dow 7,956.66, -121.70 (1.51%)
NASDAQ 1,515.05, -1.25 (0.08%)
S&P 500 832.23, -6.28 (0.75%)
NYSE Composite 5,242.75, -25.27 (0.48%)
The blue chips were aided in their descent by 4th quarter earnings reports from Disney (DIS) and Kraft (KFT), in addition to Bank of America (BAC), which reportedly lost 12 investment bankers on the Obama announcement, jumping ship to join Deutsche Bank (DB), which has received no TARP funds nor money from their home, German government.
Among the three big losers on the Dow, Kraft posted a 72% earnings decline year-over-year, losing 9% on the day as traders punished the stock, sending it to 26.13, down 2.61 at the close. Disney suffered through a troubling fiscal first quarter, earning 45 cents a share in the quarter ended Dec. 27, compared with 63 cents a share, in the same quarter a year ago. Disney finished at 19.00, off 1.60, a 7.8% loss.
Bank of America was hit with massive selling, with more than 600 million shares changing hands, almost 4 times the average daily volume. shares fell to 4.60, a 17-year low, off 0.60, a decline of more than 11%. The number of shares trading is significant in that many funds, by charter, cannot maintain positions in stocks valued under $5 per share. The rout of the bank's backers should continue as long as the company's shares remain at depressed levels.
In truth, Bank of America should already have filed for bankruptcy protection as its operations have been underwater for quite some time. Continuing to shovel money into the bottomless pits of BofA and Citigroup, particularly, has been a mistake from the very start. No business is "too big to fail" and pouring taxpayer money into these obviously failed institutions is a monumental blunder on the part of the federal government, more likely to prolong and deepen the financial crisis than repair it.
A very astute rendering of the current economic malaise is offered by Ismael Hossein Zadeh, in "Too Big to Fail:" a Bailout Hoax at counterpunch.org. This article should be required reading for all of our elected federal officials, who, as a group, are poorly prepared to handle any kind of economy, especially one which is in dire straits.
Sadly, most of them will not read it or any other tract on economics, being that, for most of them, their major accomplishments involve using other people's money to land big-time government jobs. Of all the 650 or so congresspeople there is maybe a handful (10 to 20) who really have a grasp for economics of this scale. The rest simply are led by their noses by supposed government "experts" who dictate policy. There's little doubt that the worst enemy of the United States of America does not domicile in Afghan or Pakistani caves, but in tony residences around the Capitol. The lot of them and their predecessors has led America down this path of destruction since 1980 at least. Those currently holding office in congress will certainly finish the job in a smashing manner, impoverishing the nation in a manner never before seen.
As for the president who promised change, little has. Instead, he has surrounded himself with the very same people who are responsible for the whole mess. Yes, I voted for him, thinking he could turn around many of our mistakes, but, thus far, he has been a huge disappointment, favoring massive deficit spending over actual, practical solutions, like cutting the payroll tax, surely the easiest and quickest way to stimulate the overall economy.
Interestingly, and probably not coincidentally, today's morning rally stalled out just above my magic 8149.09 mark, the level which cannot be penetrated before lows are retested. This number is turning out to be a very strong resistance point, one that could endure for months, if not years. The Dow needs to fall further and our economy needs to find a solid footing before advancing in any meaningful way. That, sadly, is also months, or years, away and seemingly getting pushed further along the horizon every day.
The sooner the pols in Washington realize that decentralization of everything from the energy grid to banking to politics is at the heart of recovery, the sooner various parts of the country can begin to function well again. What's interesting and even amusing about this economic era is that the people being damaged the most are, not in any particular order, the rich, Wall Street, and Washington politicians, the last of which is rapidly losing credibility and relevance.
Recovery will begin more on local levels than at the federal. Communities with forward-looking. realistic activists will be better prepared to deal with the downturn and offer solutions for recovery. Those solutions will be more proactive and less involved with government and other macro-style solutions. They are likely to be based on models of sustainability, conservation and localism. The ideas are emerging. Many of them will be featured on this very blog as they become evident.
On the day, market internals confirmed the absolute pummeling the markets took on Wednesday. Declining issues overwhelmed advancers, 3732-2766. New lows expanded their edge over new highs, 235-17. Volume was strong, indicating that the decline is gaining momentum.
NYSE Volume 6,413,953,000
NASDAQ Volume 2,187,395,750
Commodities continue to trade in mixed fashion with oil falling 46 cents to $40.32, while gold gained $9.70, to $902.20, and silver posting a 17 cent gain, to $12.47. This is likely a trend which will continue. Commodities which are used widely - energy and food stocks - should continue to feel the pinch of deflation, while the safety of the precious metals will attract smart money seeking safety. Naturally, when the real effects of government overspending become evident in a weakened dollar, those same commodities should rise, and the metals will go parabolic. That eventuality is likely 2-3 years away, maybe longer.
In the interim, the US and world economies are undergoing a massive shift from globalization to localization. More and more people every day are understanding that their basic needs are not being met by government and ultra-national corporate entities, but by local economies, farms, businesses and people. This could be the beginning of the absolute end of big government in its many layers. From towns and villages all the way up to the federal level, the American public is increasingly weary of being overtaxed and underserved, harassed and obligated to the very institutions which are supposed to support and protect us.
Wall Street and Washington has screwed us all the way down. The American people will fix this on the way up, but, like a drunk with a problem, the first step is bottoming out, and we haven't done that yet. Mostly, we are still in denial.
More tomorrow.
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