Despite another sour report on Existing Home Sales for January - off 7.2% - investors and speculators bid up stocks slightly on the final trading day of February.
Following the release of the housing data at 10:00 am, stocks sank to their lows of the day, but, as has been the case recently, the not-quite-invisible hand of the PPT or other erstwhile stock manipulators pushed the index to its high of the day in less than 30 minutes, a move of roughly 75 points on the Dow.
After that initial burst of despair and excitement, stocks vacillated just above the unchanged mark for the remainder of a lackluster session, one with even lower trading volume than normal due to severe winter storms in the Northeast. Also, just moments before the closing bell, word that a 7.0 magnitude earthquake had struck off Japan seemed to rattle traders, selling off a roughly 20 point gain in the final five minutes.
Dow 10,325.26, +4.23 (0.04%)
NASDAQ 2,238.26, +4.04 (0.18%)
S&P 500 1,104.49, +1.56 (0.14%)
NYSE Composite 7,035.04, +21.59 (0.31%)
Advancing issues led decliners, 3887-2872. There were 312 new highs, to just 34 new lows. Volume was spare.
NYSE Volume 4,742,490,500
NASDAQ Volume 2,153,935,500
Oil finished ahead by $1.49, at $79.66. Gold gained $10.00, to $1,118.50, while silver also was up, ahead by 37 cents, to $16.51.
The major indices finished up for the day and the month, but down for the week. In 2010, stocks have finished weeks on the upside just 3 times and lower 5 times. The major indices are down for the year, but only by 1 or 2%.
The government's revised reading on 4th quarter GDP was no surprise, at 5.9%. Chicago PMI was up a point, to 62.6, in February, and the University of Michigan's Final Consumer Sentiment gauge for February came in at 73.6.
Friday, February 26, 2010
Thursday, February 25, 2010
Suckers Galore in Classic Pump and Dump
One has to wonder just how much bad news it will take to send stocks down for the count. Just this week, the Conference Board's measure of consumer confidence trundled down ten full points to 46, a level not seen since 1983. New home sales for January fell to 309,000, a figure more reminiscent of 1962 than 2010, and, just this morning, new filings for unemployment insurance claims reached 496,000, the third consecutive weekly rise in that number, signaling that instead of declining, unemployment may actually be on the rise again.
Adding to the difficult situation is word that Goldman Sachs - tops on everyone's most-hated company list - will soon be under investigation by the Federal Reserve (what a laugh!) for trading in Credit Default Swaps (CDS) related to the nation of Greece. The Fed would like to know if Goldman traders have been betting on a default of Greece's debt, and, anybody who knows the language of Wall Street would have to conclude that the Goldman traders are all over it.
Not that profiting from another country's missteps or outright demise is in any way illegal or unethical - though some may argue that the practice would be immoral - Goldman Sachs may be just the next victim lined up for the dog-and-pony show currently underway in congress. Once the congressional clowns are done with smearing Toyota, they might want to take aim at one of their country's own. Goldman Sachs makes a perfect whipping boy for the incompetent congress. Since they can't pass meaningful legislation, they have resorted to mealy-mouthed denunciations of the business community. The act takes some of the spotlight off their inept attempts at legislating and/or governing.
However, Wall Street being the biggest and most-corrupt casino on the planet, more bad news may only produce sideways trading. Perhaps half of California slipping into the Pacific might garner some support from the bulls, though such an event would likely be viewed with insidious sarcasm on Wall Street, something along the lines of, "well, there one more problem we'll not have to concern ourselves with any more."
On the day that the Dow was down 187 points by midday - a normal reaction - the index ends the session down just over 50 points - an abnormal trade. The question of whether US stocks are manipulated has already been answered over and over again, so since there's little point in beating a horse that's already dead, we can safely assume that the US economy is about to implode once again, and the insiders in DC and on Wall Street already know it. They're just waiting for the optimal moment - when they have as many suckers as possible fully invested in stocks - to sell everything and run for the hills, sending the markets into another spasmodic paroxysm of panic-induced crashing.
While my interpretation of market movements and political foreplay may sound to some like the last days of Cicero, it's about the best I a able to muster considering the abysmal trappings to which we are currently bound. The banking and credit system is broken and more prone to penalize borrowers than help them, real estate is a bad bet for anything other than arable land and the political process has largely ground to a complete halt. Nothing short of a major war is going to solve the debt problems of the developed world, especially Europe, Japan and the United States, a prospect which I do not wish to see, nor do I espouse. Wars only solve nations' problems - and not very well - at the expense of the lives of the general public.
However, as much as I'd like to wax positive on the current condition, I see only gloom and doom ahead for those who are not adequately prepared. Personally, I've divested all of my holdings in anything speculative and am completely in cash and productive investments: tools and seeds, for today; machines and vegetables, tomorrow.
Dow 10,321.03, -53.13 (0.51%)
NASDAQ 2,234.22, -1.68 (0.08%)
S&P 500 1,102.93, -2.31 (0.21%)
NYSE Composite 7,013.45, -17.22 (0.24%)
Not unexpectedly, declining issues beat advancers, though not by nearly the 3-1 margin seen earlier in the day, 3458-2969. New highs stood at 225. There were 45 new lows. Volume was at its best level of the week, owing, in part, to the incredibly heavy lifting done by those who eviscerated nearly 140 points from the downside.
NYSE Volume 5,247,205,000
NASDAQ Volume 2,268,341,000
Commodities were mixed again, though today was oil's day for decline. Crude was off $1.70, to $78.30. Gold gained $11.20, to $1,108.40, on rumors that the government of China was planning to buy up the remaining reserves of the IMF. Silver dipped 2 cents, to $15.94.
Tomorrow, being the final day of trading for the week and the month, ought to offer even more ammo for interested parties. The government issues the second estimate of 4th quarter '09 GDP, existing home sales for January are offered and the Chicago PMI and U of Michigan final February consumer sentiment gauge are all on tap.
10,400 is the magic number on the Dow. Closing above that would be the third straight weekly positive finish. For the year, the Dow's record for weekly closes stands at 2 up and 4 down.
Adding to the difficult situation is word that Goldman Sachs - tops on everyone's most-hated company list - will soon be under investigation by the Federal Reserve (what a laugh!) for trading in Credit Default Swaps (CDS) related to the nation of Greece. The Fed would like to know if Goldman traders have been betting on a default of Greece's debt, and, anybody who knows the language of Wall Street would have to conclude that the Goldman traders are all over it.
Obviously, using these instruments in a way that intentionally destabilizes a company or a country is counterproductive. - Fed Chairman Ben Bernanke
Not that profiting from another country's missteps or outright demise is in any way illegal or unethical - though some may argue that the practice would be immoral - Goldman Sachs may be just the next victim lined up for the dog-and-pony show currently underway in congress. Once the congressional clowns are done with smearing Toyota, they might want to take aim at one of their country's own. Goldman Sachs makes a perfect whipping boy for the incompetent congress. Since they can't pass meaningful legislation, they have resorted to mealy-mouthed denunciations of the business community. The act takes some of the spotlight off their inept attempts at legislating and/or governing.
However, Wall Street being the biggest and most-corrupt casino on the planet, more bad news may only produce sideways trading. Perhaps half of California slipping into the Pacific might garner some support from the bulls, though such an event would likely be viewed with insidious sarcasm on Wall Street, something along the lines of, "well, there one more problem we'll not have to concern ourselves with any more."
On the day that the Dow was down 187 points by midday - a normal reaction - the index ends the session down just over 50 points - an abnormal trade. The question of whether US stocks are manipulated has already been answered over and over again, so since there's little point in beating a horse that's already dead, we can safely assume that the US economy is about to implode once again, and the insiders in DC and on Wall Street already know it. They're just waiting for the optimal moment - when they have as many suckers as possible fully invested in stocks - to sell everything and run for the hills, sending the markets into another spasmodic paroxysm of panic-induced crashing.
While my interpretation of market movements and political foreplay may sound to some like the last days of Cicero, it's about the best I a able to muster considering the abysmal trappings to which we are currently bound. The banking and credit system is broken and more prone to penalize borrowers than help them, real estate is a bad bet for anything other than arable land and the political process has largely ground to a complete halt. Nothing short of a major war is going to solve the debt problems of the developed world, especially Europe, Japan and the United States, a prospect which I do not wish to see, nor do I espouse. Wars only solve nations' problems - and not very well - at the expense of the lives of the general public.
However, as much as I'd like to wax positive on the current condition, I see only gloom and doom ahead for those who are not adequately prepared. Personally, I've divested all of my holdings in anything speculative and am completely in cash and productive investments: tools and seeds, for today; machines and vegetables, tomorrow.
Dow 10,321.03, -53.13 (0.51%)
NASDAQ 2,234.22, -1.68 (0.08%)
S&P 500 1,102.93, -2.31 (0.21%)
NYSE Composite 7,013.45, -17.22 (0.24%)
Not unexpectedly, declining issues beat advancers, though not by nearly the 3-1 margin seen earlier in the day, 3458-2969. New highs stood at 225. There were 45 new lows. Volume was at its best level of the week, owing, in part, to the incredibly heavy lifting done by those who eviscerated nearly 140 points from the downside.
NYSE Volume 5,247,205,000
NASDAQ Volume 2,268,341,000
Commodities were mixed again, though today was oil's day for decline. Crude was off $1.70, to $78.30. Gold gained $11.20, to $1,108.40, on rumors that the government of China was planning to buy up the remaining reserves of the IMF. Silver dipped 2 cents, to $15.94.
Tomorrow, being the final day of trading for the week and the month, ought to offer even more ammo for interested parties. The government issues the second estimate of 4th quarter '09 GDP, existing home sales for January are offered and the Chicago PMI and U of Michigan final February consumer sentiment gauge are all on tap.
10,400 is the magic number on the Dow. Closing above that would be the third straight weekly positive finish. For the year, the Dow's record for weekly closes stands at 2 up and 4 down.
Wednesday, February 24, 2010
Our National Disgrace: the United States Congress
Sorry to take time out here to vent, but, after watching less than ten minutes of DC delegate Eleanor Holmes Norton vain attempts to vilify Toyota executives in a hearing before the House Oversight and Government Reform Committee made me ponder the usefulness of this formerly-august body.
This is the gang of 535, with a national approval rating hovering around 20% that has taken as much money from lobbyists as legally-allowed (and probably more), sat back and watched as the banking interests took over and nearly destroyed the country's economy, and hasn't done much of anything useful or in the best interests of the American people since the early 50s, or, most of my lifetime.
Listening to the moronic Barney Frank drool his way through Fed Chairman Ben Bernanke's required testimony today was quite enough. Frank and his fellow goof-balls proved they have about the same working knowledge of financial matters as your average 3rd grader, and even that might give 3rd graders a bum rap.
But this Toyota nonsense is the ultimate disgrace of our country. I feel I must publicly apologize to the people of Japan for the actions of our congress and other government regulatory agencies. I'm sorry, Japan! I didn't vote for any of these fools, and they certainly don't represent me or my beliefs.
Dragging the head of Toyota and other executives before a congressional committee is just a continuance of the massive government smear campaign designed to make people stop thinking about our destroyed economy and throw blame on the "evil" Toyota executives.
It's the worst kind of race-baiting and every member of that committee should resign in disgrace. Toyota's problems may be serious, but they're surely not any worse than other carmakers faults. The timing of this entire sordid folly seems just about appropriate for the idiots who are supposed to be "serving the people." Just months ago, General Motors and Chrysler received - and haven't yet paid back - billions of dollars from taxpayers to salvage what was left of their disastrous businesses.
Soon thereafter came rumors of Toyota's "sudden acceleration" issues, and the game was on. Now congress, attempting to look serious, brings Toyota execs in to be chastised publicly. It's just one more sad day - piled upon hundreds if not thousands before it - of congress publicly displaying their absolute incompetence.
Is there any wonder why so many "tea parties" and splinter political groups have emerged over the past few years. Congress has abrogated their authority, shirked their responsibilities and now can only pander to the lowest, most base emotions of the public throng. They are a national disgrace and the sooner they are run out of office and out of town, the better.
**********************
Down on Wall Street, markets got an unexpected bump up early in the day. Without any reason, the Dow jumped about 90 points in a span of about 20 minutes, right around 10:30 am. The other indices were also goosed higher, presumably by insiders or the notorious PPT, right during Bernanke's testimony.
These kinds of moves have gotten to be old hat by now, and accepted as normal by most market participants, but they are surely designed to keep stocks grinding along and not falling into the slop where many of them belong.
Yesterday, the news on two fronts - housing and consumer sentiment - sent the indices screeching into a hole. Today, without any catalyst, they practically erased all of Tuesday's losses, which is why I have been out of stocks mostly since 2007, and now, permanently. There's no rhyme nor reason to the equity markets currently, thus, there's no reason to be even one penny invested in stocks. There will be a fall this year, and it's likely to rival the collapse from September 2008 to March 2009, regardless of the efforts of big money players or government miscreants.
The only data release of any importance was negative: New home sales for January fell 11.2% month-over-month in their worst monthly downturn since January 2009. So, naturally, stocks should go up?
Dow 10,374.16, +91.75 (0.89%)
NASDAQ 2,235.90, +22.46 (1.01%)
S&P 500 1,105.24, +10.64 (0.97%)
NYSE Composite 7,030.67, +56.07 (0.80%)
Advancers slaughtered decliners, 4443-2038. New highs: 254; new lows: 59. Volume was moderate.
NYSE Volume 4,734,957,000
NASDAQ Volume 2,119,022,000
Commodities traded in different directions. Crude oil, even after the government reported that inventories rose by 3.03 million barrels, gained $1.24, to $80.21. To point up just how manipulated and corrupt the crude oil futures exchange is, here is an article expressing the opinion that crude rose because the dollar was weak. The article also points out that the American Petroleum Institute announced Tuesday that crude inventories had fallen by 3.1 million barrels.
Up, down, who cares? As long as the oil barons continue cashing their checks. No need to worry that persistently high fuel prices over the past seven years have helped cripple the US economy.
So, if the weak dollar caused oil prices to rise, why then, did gold lose $6.40, and drop to $1,096.80. Apparently, gold is no longer tracking the dollar and responding inversely to it. Or, maybe it's all just speculation, fun and games. Incidentally, silver was up 17 cents, at $15.98 per ounce.
And just so I know the world isn't completely off its axis (although close to spinning out of control), I see Fast Money is back on the air on CNBC. What, no curling? Maybe somebody actually took my impassioned plea from yesterday seriously.
This is the gang of 535, with a national approval rating hovering around 20% that has taken as much money from lobbyists as legally-allowed (and probably more), sat back and watched as the banking interests took over and nearly destroyed the country's economy, and hasn't done much of anything useful or in the best interests of the American people since the early 50s, or, most of my lifetime.
Listening to the moronic Barney Frank drool his way through Fed Chairman Ben Bernanke's required testimony today was quite enough. Frank and his fellow goof-balls proved they have about the same working knowledge of financial matters as your average 3rd grader, and even that might give 3rd graders a bum rap.
But this Toyota nonsense is the ultimate disgrace of our country. I feel I must publicly apologize to the people of Japan for the actions of our congress and other government regulatory agencies. I'm sorry, Japan! I didn't vote for any of these fools, and they certainly don't represent me or my beliefs.
Dragging the head of Toyota and other executives before a congressional committee is just a continuance of the massive government smear campaign designed to make people stop thinking about our destroyed economy and throw blame on the "evil" Toyota executives.
It's the worst kind of race-baiting and every member of that committee should resign in disgrace. Toyota's problems may be serious, but they're surely not any worse than other carmakers faults. The timing of this entire sordid folly seems just about appropriate for the idiots who are supposed to be "serving the people." Just months ago, General Motors and Chrysler received - and haven't yet paid back - billions of dollars from taxpayers to salvage what was left of their disastrous businesses.
Soon thereafter came rumors of Toyota's "sudden acceleration" issues, and the game was on. Now congress, attempting to look serious, brings Toyota execs in to be chastised publicly. It's just one more sad day - piled upon hundreds if not thousands before it - of congress publicly displaying their absolute incompetence.
Is there any wonder why so many "tea parties" and splinter political groups have emerged over the past few years. Congress has abrogated their authority, shirked their responsibilities and now can only pander to the lowest, most base emotions of the public throng. They are a national disgrace and the sooner they are run out of office and out of town, the better.
Down on Wall Street, markets got an unexpected bump up early in the day. Without any reason, the Dow jumped about 90 points in a span of about 20 minutes, right around 10:30 am. The other indices were also goosed higher, presumably by insiders or the notorious PPT, right during Bernanke's testimony.
These kinds of moves have gotten to be old hat by now, and accepted as normal by most market participants, but they are surely designed to keep stocks grinding along and not falling into the slop where many of them belong.
Yesterday, the news on two fronts - housing and consumer sentiment - sent the indices screeching into a hole. Today, without any catalyst, they practically erased all of Tuesday's losses, which is why I have been out of stocks mostly since 2007, and now, permanently. There's no rhyme nor reason to the equity markets currently, thus, there's no reason to be even one penny invested in stocks. There will be a fall this year, and it's likely to rival the collapse from September 2008 to March 2009, regardless of the efforts of big money players or government miscreants.
The only data release of any importance was negative: New home sales for January fell 11.2% month-over-month in their worst monthly downturn since January 2009. So, naturally, stocks should go up?
Dow 10,374.16, +91.75 (0.89%)
NASDAQ 2,235.90, +22.46 (1.01%)
S&P 500 1,105.24, +10.64 (0.97%)
NYSE Composite 7,030.67, +56.07 (0.80%)
Advancers slaughtered decliners, 4443-2038. New highs: 254; new lows: 59. Volume was moderate.
NYSE Volume 4,734,957,000
NASDAQ Volume 2,119,022,000
Commodities traded in different directions. Crude oil, even after the government reported that inventories rose by 3.03 million barrels, gained $1.24, to $80.21. To point up just how manipulated and corrupt the crude oil futures exchange is, here is an article expressing the opinion that crude rose because the dollar was weak. The article also points out that the American Petroleum Institute announced Tuesday that crude inventories had fallen by 3.1 million barrels.
Up, down, who cares? As long as the oil barons continue cashing their checks. No need to worry that persistently high fuel prices over the past seven years have helped cripple the US economy.
So, if the weak dollar caused oil prices to rise, why then, did gold lose $6.40, and drop to $1,096.80. Apparently, gold is no longer tracking the dollar and responding inversely to it. Or, maybe it's all just speculation, fun and games. Incidentally, silver was up 17 cents, at $15.98 per ounce.
And just so I know the world isn't completely off its axis (although close to spinning out of control), I see Fast Money is back on the air on CNBC. What, no curling? Maybe somebody actually took my impassioned plea from yesterday seriously.
Tuesday, February 23, 2010
Real Estate, Low Confidence Crush Stocks
It didn't take long for the market to re-establish some sense of direction after drifting sideways the past two sessions.
Hopes for an economic recovery were dashed with the release of two separate reports. First, at 9:00 am, the monthly S&P/Case-Shiller 20-city index showed an overall 3.2% decline from a year ago. While several cities - San Francisco, San Diego, Denver, Washington, DC and Dallas - showed home prices improving modestly, most of the cities in the survey displayed continued carnage, with the worst being Las Vegas (-20.6%), followed by Tampa (-11.0%), Detroit (-10.3%), Miami (-9.9%) and Seattle, Washington (-7.8%).
Widespread continuing weakness in the real estate market has been attributed to poor underwriting standards during the boom years, 2000-2006, though more and more declining property values are being cited as an effect of worsening unemployment conditions. Foreclosures keep rising without abating in most large cities and even more so in smaller communities which have a less-robust employer base. Even though delinquencies are reported, banks have been reluctant to foreclose, and there's widespread belief that a so-called "shadow inventory" of non-foreclosed and bank owned property still awaits to hit the market with a deadening thud.
Even a small addition of unsold properties reaching various markets over the next six to eighteen months would send real estate prices down even lower, but the quantities may be more of a torrent rather than a trickle. With Fannie Mae and Freddie Mac already in deep trouble, the residential real estate market is looking more and more like a wasteland and less like a "recovering" market.
That report alone was not enough to dampen spirits on Wall Street, as stocks, after opening slightly lower, were up steadily in the early going, until the second blast of negative news reached. When the Conference Board's Consumer Confidence Index for February came in at 46.0, down from 56.5 in January, all hope for a continuation of any rally was lost. Commentators on CNBC and elsewhere were aghast at the "unexpected" decline, mostly by the size of it. The one-month drop of more than 10 points was the most anyone could remember.
Ancillary indices, such as the present situation, also dropped sharply, from 25.2 to 19.4, its lowest level in 27 years. The expectations index declined to 63.8, from 77.3 in January. That was more than enough to send the Dow to a 100-point loss, with the other major indices in tow.
Those two reports brought the bears and bearish analysts out from the woodwork. The sheer number of people expressing negative viewpoints - on TV, radio, the internet and in print - was stunning.
Dow 10,282.41, -100.97 (0.97%)
NASDAQ 2,213.44, -28.59 (1.28%)
S&P 500 1,094.60, -13.41 (1.21%)
NYSE Composite 6,974.60, -103.93 (1.47%)
Declining issues took the edge over advancers, 4457-2057. New highs came back to earth at 202, with only 31 new lows, though, it must be pointed out that these figures are going to be skewed wildly by comparisons to stocks at market bottoms from last year. It won't be until late March or later that the high-low metric will offer much of a reliable glimpse. Volume was a bit better than yesterday's no-show, but there is now likely much more downside risk than in recent days.
NYSE Volume 4,971,602,500
NASDAQ Volume 2,139,569,750
Commodities took it on the chin as well. Crude oil for April delivery, in just the second day of the contract, fell $1.45, to $78.86. Gold lost $10.10, to close at $1,103.00. Silver fell 34 cents, to $15.91.
The onslaught of data today may be just the beginning of poor economic news heading to kill off the incipient rally in equities. While Wall Street may be reveling, most of Main Street is reeling. The persistent and deep declines in prices and markets will leave no asset class untouched, equities and commodities included.
Be aware that stocks could tumble off another cliff at any time without warning. The US and global markets have not made enough real, structural changes and are not yet strong enough to offset the overwhelming deflationary spiral that continues to plague economies from households to cities and states, to entire nations.
In the meantime, could somebody please tell the programming executives at CNBC that curling has to be the most uninteresting, boring, exasperatingly dull event to ever be afforded significant air time? Enough, already!
Hopes for an economic recovery were dashed with the release of two separate reports. First, at 9:00 am, the monthly S&P/Case-Shiller 20-city index showed an overall 3.2% decline from a year ago. While several cities - San Francisco, San Diego, Denver, Washington, DC and Dallas - showed home prices improving modestly, most of the cities in the survey displayed continued carnage, with the worst being Las Vegas (-20.6%), followed by Tampa (-11.0%), Detroit (-10.3%), Miami (-9.9%) and Seattle, Washington (-7.8%).
Widespread continuing weakness in the real estate market has been attributed to poor underwriting standards during the boom years, 2000-2006, though more and more declining property values are being cited as an effect of worsening unemployment conditions. Foreclosures keep rising without abating in most large cities and even more so in smaller communities which have a less-robust employer base. Even though delinquencies are reported, banks have been reluctant to foreclose, and there's widespread belief that a so-called "shadow inventory" of non-foreclosed and bank owned property still awaits to hit the market with a deadening thud.
Even a small addition of unsold properties reaching various markets over the next six to eighteen months would send real estate prices down even lower, but the quantities may be more of a torrent rather than a trickle. With Fannie Mae and Freddie Mac already in deep trouble, the residential real estate market is looking more and more like a wasteland and less like a "recovering" market.
That report alone was not enough to dampen spirits on Wall Street, as stocks, after opening slightly lower, were up steadily in the early going, until the second blast of negative news reached. When the Conference Board's Consumer Confidence Index for February came in at 46.0, down from 56.5 in January, all hope for a continuation of any rally was lost. Commentators on CNBC and elsewhere were aghast at the "unexpected" decline, mostly by the size of it. The one-month drop of more than 10 points was the most anyone could remember.
Ancillary indices, such as the present situation, also dropped sharply, from 25.2 to 19.4, its lowest level in 27 years. The expectations index declined to 63.8, from 77.3 in January. That was more than enough to send the Dow to a 100-point loss, with the other major indices in tow.
Those two reports brought the bears and bearish analysts out from the woodwork. The sheer number of people expressing negative viewpoints - on TV, radio, the internet and in print - was stunning.
Dow 10,282.41, -100.97 (0.97%)
NASDAQ 2,213.44, -28.59 (1.28%)
S&P 500 1,094.60, -13.41 (1.21%)
NYSE Composite 6,974.60, -103.93 (1.47%)
Declining issues took the edge over advancers, 4457-2057. New highs came back to earth at 202, with only 31 new lows, though, it must be pointed out that these figures are going to be skewed wildly by comparisons to stocks at market bottoms from last year. It won't be until late March or later that the high-low metric will offer much of a reliable glimpse. Volume was a bit better than yesterday's no-show, but there is now likely much more downside risk than in recent days.
NYSE Volume 4,971,602,500
NASDAQ Volume 2,139,569,750
Commodities took it on the chin as well. Crude oil for April delivery, in just the second day of the contract, fell $1.45, to $78.86. Gold lost $10.10, to close at $1,103.00. Silver fell 34 cents, to $15.91.
The onslaught of data today may be just the beginning of poor economic news heading to kill off the incipient rally in equities. While Wall Street may be reveling, most of Main Street is reeling. The persistent and deep declines in prices and markets will leave no asset class untouched, equities and commodities included.
Be aware that stocks could tumble off another cliff at any time without warning. The US and global markets have not made enough real, structural changes and are not yet strong enough to offset the overwhelming deflationary spiral that continues to plague economies from households to cities and states, to entire nations.
In the meantime, could somebody please tell the programming executives at CNBC that curling has to be the most uninteresting, boring, exasperatingly dull event to ever be afforded significant air time? Enough, already!
Monday, February 22, 2010
Stocks in Hold 'em Mode
There haven't been many slower trading days than today in the past 2-3 years, and stocks suffered from a near-total lack of interest on the session.
Maybe it's just a sign of the times, but everybody seems to be waiting for some reliable data points upon which to trade. Either that, or the markets are just stuck with a bad case of cabin fever, with traders itching to stretch out and move, though the weather isn't going to permit it any time soon.
As for reliable data points, there were two news releases, though neither could be considered reliable or tradable.
The National Association for Business Economics (NABE) predicted that the economy would grow by just over 3% in 2010 and 2011. They further detail that job growth would soon return for US business, offering predictions of average job growth of 50,000 per month in the 1st quarter of 2010 and 103,000 per month for the remainder of the year.
Those figures nearly match the ones released by the Obama administration just a week or two ago.
On Friday, the FDIC announced that four more banks had failed, bringing the total number of bank failures this year to 20. There were 140 bank closures in 2009, and the prediction is for 200 to go under in 2010.
Taken together, there's a real concern that the economic crisis that nearly crumbled the financial system in 2008 is still not fully functioning, though it is working well enough for business economists to make semi-rosy predictions. Predictions, like opinions, however, are not unique and the numbers tossed out by the NABE might be nothing more than educated guesses rather than appropriate measures of risk in the system and the realities of the day.
Dull markets are usually not playable, but, unless there's some movement to the upside, the bears may be emboldened by what appears to be widespread weakness across a wide swath of industries. The political standstill in Washington certainly isn't helping bulls any, either.
Dow 10,383.38, -18.97 (0.18%)
NASDAQ 2,242.03. -1.84 (0.08%)
S&P 500 1,108.01, -1.16 (0.10%)
NYSE Composite 7,078.53, -4.72 (0.07%)
Advancing issues beat decliners by a small margin, 3326-3179. There were 366 new highs and 31 new lows. Volume, as previously stated, was anemic.
NYSE Volume 4,244,704,000
NASDAQ Volume 1,818,306,000
Commodities were mixed, with oil up 39 cents, to $80.16, gold down $9.00, at $1,113.10, and silver off 18 cents, to $16.26. This persistent low-volume pattern might be a regular feature of trading until there's sufficient evidence to elicit moves one way or the other. Considering the prevailing economic and political landscape, there could be little movement in either direction for some time.
Maybe it's just a sign of the times, but everybody seems to be waiting for some reliable data points upon which to trade. Either that, or the markets are just stuck with a bad case of cabin fever, with traders itching to stretch out and move, though the weather isn't going to permit it any time soon.
As for reliable data points, there were two news releases, though neither could be considered reliable or tradable.
The National Association for Business Economics (NABE) predicted that the economy would grow by just over 3% in 2010 and 2011. They further detail that job growth would soon return for US business, offering predictions of average job growth of 50,000 per month in the 1st quarter of 2010 and 103,000 per month for the remainder of the year.
Those figures nearly match the ones released by the Obama administration just a week or two ago.
On Friday, the FDIC announced that four more banks had failed, bringing the total number of bank failures this year to 20. There were 140 bank closures in 2009, and the prediction is for 200 to go under in 2010.
Taken together, there's a real concern that the economic crisis that nearly crumbled the financial system in 2008 is still not fully functioning, though it is working well enough for business economists to make semi-rosy predictions. Predictions, like opinions, however, are not unique and the numbers tossed out by the NABE might be nothing more than educated guesses rather than appropriate measures of risk in the system and the realities of the day.
Dull markets are usually not playable, but, unless there's some movement to the upside, the bears may be emboldened by what appears to be widespread weakness across a wide swath of industries. The political standstill in Washington certainly isn't helping bulls any, either.
Dow 10,383.38, -18.97 (0.18%)
NASDAQ 2,242.03. -1.84 (0.08%)
S&P 500 1,108.01, -1.16 (0.10%)
NYSE Composite 7,078.53, -4.72 (0.07%)
Advancing issues beat decliners by a small margin, 3326-3179. There were 366 new highs and 31 new lows. Volume, as previously stated, was anemic.
NYSE Volume 4,244,704,000
NASDAQ Volume 1,818,306,000
Commodities were mixed, with oil up 39 cents, to $80.16, gold down $9.00, at $1,113.10, and silver off 18 cents, to $16.26. This persistent low-volume pattern might be a regular feature of trading until there's sufficient evidence to elicit moves one way or the other. Considering the prevailing economic and political landscape, there could be little movement in either direction for some time.
Friday, February 19, 2010
Fed Discount Hike No Issue
The Fed's decision to hike the discount rate (announced after the close on Thursday) created a bit of a stir in Japan's markets, but barely elicited a yawn in the US. Market participants shrugged off the Federal reserve's surprise announcement to hike the emergency rate at the discount window from half a percent to 3/4 percent (0.75) and dial back the repayment time from 30 days to 24 hours - the normal time period for what used to be known as "overnight" loans - and pulled markets into positive territory for the fourth straight session.
PIMCO's Bill Gross believes that the "surprise" Fed move was simply to appease inflation hawks on the Fed's Board of Governors, and that real rates would remain low.
Dow 10,402.35, +9.45 (0.09%)
NASDAQ 2,243.87, +2.16 (0.10%)
S&P 500 1,109.17, +2.42 (0.22%)
NYSE Composite 7,083.25, +2.87 (0.04%)
Despite the tame headline numbers, advancers pounded decliners, 3612-2828, and new highs soared past new lows, 290-30. Volume was a bit above normal, owing to February options expiration.
NYSE Volume 4,586,752,500
NASDAQ Volume 2,132,987,000
Oil continued its absurd price gains, picking up 93 cents, to $79.99. Analysts believe as much as $30-35 in the price of a barrel of crude is due to speculation. Demand has been slack for months and there has been ample supply as well. The control of the oil futures markets by a handful of participants has distorted the true pricing by quite a degree, to he dismay of many a driver.
Gold gained $3.30, to $1,122.00, and silver bumped higher by 35 cents, to $16.41.
If the Fed's action was a signal that inflation was on the horizon, January CPI data might argue otherwise. Consumer prices gained just 0.2% in the month, with core prices - excluding food and energy - fell 0.1. These figures came in stark contrast to yesterday's release of PPI, which were higher on a relative basis.
Since the Fed's discount window-dressing was more symbolism than actual rate-adjusting, the inflation-deflation debate is likely to rage onward for months. Eventually, the deflationists are probably more correct in their overall assessment of the current condition than the market-oriented inflationists.
PIMCO's Bill Gross believes that the "surprise" Fed move was simply to appease inflation hawks on the Fed's Board of Governors, and that real rates would remain low.
Dow 10,402.35, +9.45 (0.09%)
NASDAQ 2,243.87, +2.16 (0.10%)
S&P 500 1,109.17, +2.42 (0.22%)
NYSE Composite 7,083.25, +2.87 (0.04%)
Despite the tame headline numbers, advancers pounded decliners, 3612-2828, and new highs soared past new lows, 290-30. Volume was a bit above normal, owing to February options expiration.
NYSE Volume 4,586,752,500
NASDAQ Volume 2,132,987,000
Oil continued its absurd price gains, picking up 93 cents, to $79.99. Analysts believe as much as $30-35 in the price of a barrel of crude is due to speculation. Demand has been slack for months and there has been ample supply as well. The control of the oil futures markets by a handful of participants has distorted the true pricing by quite a degree, to he dismay of many a driver.
Gold gained $3.30, to $1,122.00, and silver bumped higher by 35 cents, to $16.41.
If the Fed's action was a signal that inflation was on the horizon, January CPI data might argue otherwise. Consumer prices gained just 0.2% in the month, with core prices - excluding food and energy - fell 0.1. These figures came in stark contrast to yesterday's release of PPI, which were higher on a relative basis.
Since the Fed's discount window-dressing was more symbolism than actual rate-adjusting, the inflation-deflation debate is likely to rage onward for months. Eventually, the deflationists are probably more correct in their overall assessment of the current condition than the market-oriented inflationists.
Thursday, February 18, 2010
Is Resistance Futile?
Chartists and technical analysts are fond of using the terms support and resistance when tracking trends in either individual stocks or indices. The terms are widely understood by the investing community, representing key levels for buying and/or selling.
The S&P is said to be close to resistance at 1108, though it appears very likely that this level could be taken out quite easily, if the market remains on its current trajectory. Seems like stocks are all the rage right now, the media having convinced enough people that the economy is on the mend and all will be good down the road of recovery.
Now, there's plenty of evidence to the contrary, especially the absurd notion that producer prices are rising at all. This was expressed in glaring terms by the PPI data from january, which showed a rise of 1.4% in annualized terms. That number had the inflationistas bellowing, though their howling was largely dinned by the shrieks from the initial unemployment claims figures, which, incidentally, were reported during a wicked snowstorm in the Northeast, though most of the reporting is actually done by phone or computer. The number of new unemployment filings was 473,000, a big jump from the 442,000 reported the week prior.
Normally, in a 3.5% GDP, 5% unemployment environment, those number would be about 200,000 or less, so the economy still appears to be bleeding jobs rather than creating them. We were all informed countless times by the financial literati that unemployment was a lagging indicator, though that's a suspect notion, so, we shouldn't be too concerned, should we?
Government and media sources also declared the recession over in the third quarter of last year, when Cash of Clunkers helped push the GDP to somewhere around 2.1% for the quarter. Since that, was, OK, September, we'll say, shouldn't the employment data be more robust, now that we are five months hence?
Of course none of this matters if you question the actual numbers that are routinely tossed about by the feds, states, media and other organizations which track such things. Jobs should not be lagging if US BUSINESSES are growing. Otherwise, it's just accounting gimmicks, cost-cutting and downsizing.
Nevertheless, those intrepid Wall Street investors continue to dive into equities, mostly on any decline in the US dollar, like today, and Tuesday. The bad, unsustainable and eventually self-destructive carry trade is still on, so they party on.
Dow 10,392.90, +83.66 (0.81%)
NASDAQ 2,241.71, +15.42 (0.69%)
S&P 500 1,106.75, +7.24 (0.66%)
NYSE Composite 7,080.38, +45.18 (0.64%)
Advancing issues led decliners, 4177-2270, while new highs beat new lows, 202-30. Once again, the new lows are being squashed by comparisons to last year's bottom. Realistically, there should be very few, and there are. Give this indicator wide latitude in your analysis because it is very skewed to the positive right now. After March 9, and especially by June, the numbers will be much more reliable. Volume was light. The NYSE recorded its third slowest trading day of the year. A good deal of positioning is taking place, and certainly, players are hedged to the max. News flows and data will be critical over the next 30-45 days for determining direction.
NYSE Volume 4,480,385,500
NASDAQ Volume 2,048,994,500
Crude oil continued its ridiculous path, gaining $1.12, to $78.45. Gold dropped $1.10, to $1,119.00. Silver fell 8 cents to $16.02.
Unless stocks really tank on Friday, this week will go down as the second straight gainer and third overall, against four losing weeks. Good luck.
The S&P is said to be close to resistance at 1108, though it appears very likely that this level could be taken out quite easily, if the market remains on its current trajectory. Seems like stocks are all the rage right now, the media having convinced enough people that the economy is on the mend and all will be good down the road of recovery.
Now, there's plenty of evidence to the contrary, especially the absurd notion that producer prices are rising at all. This was expressed in glaring terms by the PPI data from january, which showed a rise of 1.4% in annualized terms. That number had the inflationistas bellowing, though their howling was largely dinned by the shrieks from the initial unemployment claims figures, which, incidentally, were reported during a wicked snowstorm in the Northeast, though most of the reporting is actually done by phone or computer. The number of new unemployment filings was 473,000, a big jump from the 442,000 reported the week prior.
Normally, in a 3.5% GDP, 5% unemployment environment, those number would be about 200,000 or less, so the economy still appears to be bleeding jobs rather than creating them. We were all informed countless times by the financial literati that unemployment was a lagging indicator, though that's a suspect notion, so, we shouldn't be too concerned, should we?
Government and media sources also declared the recession over in the third quarter of last year, when Cash of Clunkers helped push the GDP to somewhere around 2.1% for the quarter. Since that, was, OK, September, we'll say, shouldn't the employment data be more robust, now that we are five months hence?
Of course none of this matters if you question the actual numbers that are routinely tossed about by the feds, states, media and other organizations which track such things. Jobs should not be lagging if US BUSINESSES are growing. Otherwise, it's just accounting gimmicks, cost-cutting and downsizing.
Nevertheless, those intrepid Wall Street investors continue to dive into equities, mostly on any decline in the US dollar, like today, and Tuesday. The bad, unsustainable and eventually self-destructive carry trade is still on, so they party on.
Dow 10,392.90, +83.66 (0.81%)
NASDAQ 2,241.71, +15.42 (0.69%)
S&P 500 1,106.75, +7.24 (0.66%)
NYSE Composite 7,080.38, +45.18 (0.64%)
Advancing issues led decliners, 4177-2270, while new highs beat new lows, 202-30. Once again, the new lows are being squashed by comparisons to last year's bottom. Realistically, there should be very few, and there are. Give this indicator wide latitude in your analysis because it is very skewed to the positive right now. After March 9, and especially by June, the numbers will be much more reliable. Volume was light. The NYSE recorded its third slowest trading day of the year. A good deal of positioning is taking place, and certainly, players are hedged to the max. News flows and data will be critical over the next 30-45 days for determining direction.
NYSE Volume 4,480,385,500
NASDAQ Volume 2,048,994,500
Crude oil continued its ridiculous path, gaining $1.12, to $78.45. Gold dropped $1.10, to $1,119.00. Silver fell 8 cents to $16.02.
Unless stocks really tank on Friday, this week will go down as the second straight gainer and third overall, against four losing weeks. Good luck.
Wednesday, February 17, 2010
Fannie and Freddie: America's Landlords?
After offering a fairly pessimistic viewpoint on what might occur should Fannie Mae and Freddie Mac become the de facto landlords of much of America, my thoughts continued to race on the topic. Being that the two troubled mortgage insurers are soon to embark upon buying up billions of dollars worth of defaulted residential mortgages by prepaying investors of packaged mortgage-backed securities (MBS), my research led to a couple of interesting observations.
First, whatever becomes of millions of defaulted mortgages, it appears that Fannie and Freddie won't be actually be issuing new mortgages - at least that's how the system is functioning at present. Fannie Mae's very own REO listings appear at a friendly-looking site called HomePath.com, where foreclosed-upon homes are listed for all parts of the country. In all instances, home are offered by local realtors and financing by banks, not the agency itself.
While this may be the case now, the future might be different. Fannie and Freddie, as unofficial branches of the federal government, might be able - in instances in which the current homeowner is offered a restructured payment regime and allowed to stay put - to forego the foreclosure process altogether by working with the affected parties through intermediaries or at their own pleasure.
This appears to be the prevailing direction of the feds, through programs such as Making Home Affordable and the Home Affordable Modification Program (HAMP). Through these programs, the banks which are servicing the loans work with the defaulted homeowner toward a solution, though the programs - celebrating their one-year anniversary today - have not, to date, been very successful.
Eventually, what would be a workable situation should Fannie and Freddie find themselves burdened with defaulted mortgages, would be to hire (Yes, I'm actually advocating the creation of more government jobs.) their own team of specialists to accelerate the process or, as suggested by the eminent economist and forecaster Jim Willie's December 30, 2009 article, Fannie Debt Merger Monetization, become landlords themselves.
The latter seems less likely, though one can hardly argue the logic of Willie's argument that rental income would be a vast new source of revenue for the feds and actually help to stabilize some conditions, not the least of which being the negative effects on neighborhoods resulting from neglected, vacant properties. That the two mortgage insurers are deeply indebted and soon to be much further in the red is a concern for another discussion, but in terms of laying the groundwork for more normalized economic conditions, the F&Fs have the potential to do some good.
So, my assumption in yesterday's post that the feds would be quick to evict might not be all that accurate. At least the current climate seems to suggest quite the opposite. In any case, the prepayments to investors will make more money available to investors (they're getting their principal back) and markets. What they do with the re-found wealth remains to be seen. Whether they might be willing to slide right back into the MBS market or invest elsewhere definitely is up to the investor, though with the now-implicit guarantee from F&F, they might well do that.
Generally, what's happening is more kicking the can down the road a bit further, although the new securities should actually be improved, with better lending standards in place to prevent defaults. The whole securitization process is still at the root of what caused much of the economic woes of recent years, and eventually there are liabilities galore for all parties, especially the US taxpayer, who has to bear the burden of more and more debt.
In a scenario in the F&F become the actual investors, the returns to the taxpayer might be even greater over time, though that argument is debatable as well. The long and short of it is that the government obviously needs to step in to relieve the Federal Reserve of its MBS holdings and the current plan seems aimed directly at that result.
While that's good for the Fed and the dollar, how it plays out in the real estate market remains to be seen. The government surely has the intention of keeping real estate prices at some realistic or sustainable level, but the intervention of Fannie and Freddie can only add to the weight of deflation in the market. Sapped homeowners and smart investors may catch sizable breaks.
The two mega-insurers are soon to be deploying billions, so there's likely to be a noticeable change all along the real estate food chain.
As far as investors in equities were concerned, today was a day for nibbling and rounding out positions. Stocks barely budged after a small, quick opening jump. The carry-through from Tuesday's big leap was moderate. Many doubts still remain for investors of all stripes.
Dow 10,309.24, +40.43 (0.39%)
NASDAQ 2,226.29, +12.10 (0.55%)
S&P 500 1,099.51, +4.64 (0.42%)
NYSE Composite 7,035.20, +21.85 (0.31%)
Advancing issues outpaced decliners, 4136-2326; new highs reached 154. There were just 20 new lows. Volume was a little better than yesterday, which brings up the possibility of repositioning on today's trade. The downtrend short term is still in play and short-timers could be readying for an early exit, as in this week, which seems to be the currently favored play.
NYSE Volume 4,887,593,500
NASDAQ Volume 2,069,575,625
Commodities barely budged. Crude oil gained 19 cents, to $77.33. Gold dropped 20 cents, to $1120.00, and silver slipped 8 cents, to $16.07. Interest in the metals seems to have waned a bit, but, as we well know, that could change overnight. Much of the current weakness is due to the strengthening US dollar, which was higher again today.
While my outlook for the housing sector may have been softened a bit concerning Fannie and Freddie, my general conclusion is that complete debt default by nations is only a matter of time. Though Greece and other Euro-zone nations may have slid off front pages, their horrific fiscal conditions remain and are a proxy for a wide swath of national economies and central banks worldwide, including the United States.
First, whatever becomes of millions of defaulted mortgages, it appears that Fannie and Freddie won't be actually be issuing new mortgages - at least that's how the system is functioning at present. Fannie Mae's very own REO listings appear at a friendly-looking site called HomePath.com, where foreclosed-upon homes are listed for all parts of the country. In all instances, home are offered by local realtors and financing by banks, not the agency itself.
While this may be the case now, the future might be different. Fannie and Freddie, as unofficial branches of the federal government, might be able - in instances in which the current homeowner is offered a restructured payment regime and allowed to stay put - to forego the foreclosure process altogether by working with the affected parties through intermediaries or at their own pleasure.
This appears to be the prevailing direction of the feds, through programs such as Making Home Affordable and the Home Affordable Modification Program (HAMP). Through these programs, the banks which are servicing the loans work with the defaulted homeowner toward a solution, though the programs - celebrating their one-year anniversary today - have not, to date, been very successful.
Eventually, what would be a workable situation should Fannie and Freddie find themselves burdened with defaulted mortgages, would be to hire (Yes, I'm actually advocating the creation of more government jobs.) their own team of specialists to accelerate the process or, as suggested by the eminent economist and forecaster Jim Willie's December 30, 2009 article, Fannie Debt Merger Monetization, become landlords themselves.
The latter seems less likely, though one can hardly argue the logic of Willie's argument that rental income would be a vast new source of revenue for the feds and actually help to stabilize some conditions, not the least of which being the negative effects on neighborhoods resulting from neglected, vacant properties. That the two mortgage insurers are deeply indebted and soon to be much further in the red is a concern for another discussion, but in terms of laying the groundwork for more normalized economic conditions, the F&Fs have the potential to do some good.
So, my assumption in yesterday's post that the feds would be quick to evict might not be all that accurate. At least the current climate seems to suggest quite the opposite. In any case, the prepayments to investors will make more money available to investors (they're getting their principal back) and markets. What they do with the re-found wealth remains to be seen. Whether they might be willing to slide right back into the MBS market or invest elsewhere definitely is up to the investor, though with the now-implicit guarantee from F&F, they might well do that.
Generally, what's happening is more kicking the can down the road a bit further, although the new securities should actually be improved, with better lending standards in place to prevent defaults. The whole securitization process is still at the root of what caused much of the economic woes of recent years, and eventually there are liabilities galore for all parties, especially the US taxpayer, who has to bear the burden of more and more debt.
In a scenario in the F&F become the actual investors, the returns to the taxpayer might be even greater over time, though that argument is debatable as well. The long and short of it is that the government obviously needs to step in to relieve the Federal Reserve of its MBS holdings and the current plan seems aimed directly at that result.
While that's good for the Fed and the dollar, how it plays out in the real estate market remains to be seen. The government surely has the intention of keeping real estate prices at some realistic or sustainable level, but the intervention of Fannie and Freddie can only add to the weight of deflation in the market. Sapped homeowners and smart investors may catch sizable breaks.
The two mega-insurers are soon to be deploying billions, so there's likely to be a noticeable change all along the real estate food chain.
As far as investors in equities were concerned, today was a day for nibbling and rounding out positions. Stocks barely budged after a small, quick opening jump. The carry-through from Tuesday's big leap was moderate. Many doubts still remain for investors of all stripes.
Dow 10,309.24, +40.43 (0.39%)
NASDAQ 2,226.29, +12.10 (0.55%)
S&P 500 1,099.51, +4.64 (0.42%)
NYSE Composite 7,035.20, +21.85 (0.31%)
Advancing issues outpaced decliners, 4136-2326; new highs reached 154. There were just 20 new lows. Volume was a little better than yesterday, which brings up the possibility of repositioning on today's trade. The downtrend short term is still in play and short-timers could be readying for an early exit, as in this week, which seems to be the currently favored play.
NYSE Volume 4,887,593,500
NASDAQ Volume 2,069,575,625
Commodities barely budged. Crude oil gained 19 cents, to $77.33. Gold dropped 20 cents, to $1120.00, and silver slipped 8 cents, to $16.07. Interest in the metals seems to have waned a bit, but, as we well know, that could change overnight. Much of the current weakness is due to the strengthening US dollar, which was higher again today.
While my outlook for the housing sector may have been softened a bit concerning Fannie and Freddie, my general conclusion is that complete debt default by nations is only a matter of time. Though Greece and other Euro-zone nations may have slid off front pages, their horrific fiscal conditions remain and are a proxy for a wide swath of national economies and central banks worldwide, including the United States.
Tuesday, February 16, 2010
Tough to be a Bear
Days like today, when one feels like a lonely whisper in the wilderness, test the courage of one's convictions.
After carefully weighing all the evidence, poring over tracts and texts from sources far-flung across the internet and the spheres of influence in global economics, one cannot escape the thinking that the entire structure of capitalism, the integrity of institutions so revered as the Federal Reserve and market disciplines such as balanced budgets have been flung out the window by nefarious forces which seek only to obfuscate and delay the inevitability of mass defaults on everything from sovereign debt to credit cards in the coming months and years.
On Wall Street, ready for business after a three-day holiday, everything was bright and cheery and on the way up. Market participants acted as though stocks were difficult to find and hold at decent prices. Right off the opening bell, the Dow gapped up roughly 70 points and continued on a day-long trek to higher ground.
Unease over credit issues in Greece, Portugal and Ireland were treated as though they were old news, even though nothing but words have passed between the Euro nations. Unemployment, forecast by the Obama administration to be officially above 8% though 2012 (though unofficial, and probably closer-to-the-truth estimates say it's currently about 18%) only received passing glances. The ungodly mess that is the US housing market continues to crater into a morass of default, foreclosure, clouded titles and ruined families. None of this made one bit of difference to the titans of finance who lord over the markets. Stocks would rise; the economy be damned!
It's tough to keep a smile or a straight face through days like today. All anyone can effuse over are a couple of corporate earnings reports from some marginal players and one or two major ones, Kraft and Merck, both of which released 4th quarter earnings befor the bell. Merck did better, Kraft about the same. Meanwhile, the fates of millions of Americans are blowing in the wind, as corporations show not the least bit of interest in creating new jobs by expanding their businesses. No, the status quo will have to suffice for what we are forced into believing is a recovery.
Meanwhile, banks continue hoarding vast sums of money instead of lending it, congress bickers, stalls and does nothing, and middle America is supposed to sit back, watch the olympics and be content. Welcome to the fascist oligarchy.
Almost completely unnoticed was the announcement last week that Fannie Mae and Freddie Mac are going to buy back delinquent mortgages from investors, in effect, making the note-holders whole. This should come as no surprise - and even less surprise that it's not being widely reported - as the entire real estate boom and bust runs full circle. The banks got their TARP money, now the investors in all that worthless paper known as mortgage-backed securities (MBS) are getting theirs, and a whole lot sooner than anticipated. Though the investors will not reap the benefits of compound interest over many years has the mortgages been maintained, they will get their principal back, and probably some small gain, thanks to the friendly folks at Fannie and Freddie, two wholly-owned branches of the federal government, financed by taxpayer debt.
It will likely take a decade for the government to work out all the details of foreclosing on millions of homeowners, or they will claim the homes under eminent domain or through some other underhanded scheme that only the most corrupt government in the history of the world can devise. Clouding the picture further for homeowners in default is the risk of foreclosure by the wrong party, namely the mortgage servicer - the Bank of Americas, Chases and Citigroups of the world. Since the investors have been paid, the servicing banks are essentially out of the loop, having no standing in a foreclosure proceeding.
The important point is that, for the majority of mortgages in default, the only proper party to entertain a foreclosure proceeding would be Fannie or Freddie. The two have underwritten - or insured and subsequently paid for - about 9 out of 10 mortgages in the United States over the past thirty years. When Fannie or Freddie come calling, homeowners should expect to be out of their homes in record time. The government will probably have little patience with loiterers. They'll also likely not forgive the balances, either, especially in states which allow for deficiency judgments. It should prove to be a lovely decade for housing in America.
Dow 10,268.81, +169.67 (1.68%)
NASDAQ 2,214.19, +30.66 (1.40%)
S&P 500 1,094.87, +19.36 (1.80%)
NYSE Composite 7,013.35, +138.79 (2.02%)
Advancing issued trampled decliners, 4994-1564. There were 250 new highs to 54 new lows, a gap that's likely to widen in coming days as we approach the one-year anniversary of the market bottom on March 9. Expect the new lows to take away the edge by June at the latest as the market gyrates up and down. Volume was about as pathetic as ever. There's no impetus for this rally and it is probably going to be a one or two-day event. Economic reality will make an appearance before the week is out, though it should be mentioned that the same pattern has been playing out fairly steadily for weeks: On Monday, the dollar drops, free money is put into stocks and then gradually withdrawn - at a profit - as the week unfold and the dollar gains. That's the current game: week-to-week, day-to-day, hand-to-mouth.
NYSE Volume 4,737,764,500
NASDAQ Volume 1,954,910,875
Commodities rose without any compelling stimulus. Crude oil shot up to $77.01. Gold struck $1,120.00, a gain of $30. Silver rose 64 cents, to $16.09.
Sell the rally. It won't last.
After carefully weighing all the evidence, poring over tracts and texts from sources far-flung across the internet and the spheres of influence in global economics, one cannot escape the thinking that the entire structure of capitalism, the integrity of institutions so revered as the Federal Reserve and market disciplines such as balanced budgets have been flung out the window by nefarious forces which seek only to obfuscate and delay the inevitability of mass defaults on everything from sovereign debt to credit cards in the coming months and years.
On Wall Street, ready for business after a three-day holiday, everything was bright and cheery and on the way up. Market participants acted as though stocks were difficult to find and hold at decent prices. Right off the opening bell, the Dow gapped up roughly 70 points and continued on a day-long trek to higher ground.
Unease over credit issues in Greece, Portugal and Ireland were treated as though they were old news, even though nothing but words have passed between the Euro nations. Unemployment, forecast by the Obama administration to be officially above 8% though 2012 (though unofficial, and probably closer-to-the-truth estimates say it's currently about 18%) only received passing glances. The ungodly mess that is the US housing market continues to crater into a morass of default, foreclosure, clouded titles and ruined families. None of this made one bit of difference to the titans of finance who lord over the markets. Stocks would rise; the economy be damned!
It's tough to keep a smile or a straight face through days like today. All anyone can effuse over are a couple of corporate earnings reports from some marginal players and one or two major ones, Kraft and Merck, both of which released 4th quarter earnings befor the bell. Merck did better, Kraft about the same. Meanwhile, the fates of millions of Americans are blowing in the wind, as corporations show not the least bit of interest in creating new jobs by expanding their businesses. No, the status quo will have to suffice for what we are forced into believing is a recovery.
Meanwhile, banks continue hoarding vast sums of money instead of lending it, congress bickers, stalls and does nothing, and middle America is supposed to sit back, watch the olympics and be content. Welcome to the fascist oligarchy.
Almost completely unnoticed was the announcement last week that Fannie Mae and Freddie Mac are going to buy back delinquent mortgages from investors, in effect, making the note-holders whole. This should come as no surprise - and even less surprise that it's not being widely reported - as the entire real estate boom and bust runs full circle. The banks got their TARP money, now the investors in all that worthless paper known as mortgage-backed securities (MBS) are getting theirs, and a whole lot sooner than anticipated. Though the investors will not reap the benefits of compound interest over many years has the mortgages been maintained, they will get their principal back, and probably some small gain, thanks to the friendly folks at Fannie and Freddie, two wholly-owned branches of the federal government, financed by taxpayer debt.
It will likely take a decade for the government to work out all the details of foreclosing on millions of homeowners, or they will claim the homes under eminent domain or through some other underhanded scheme that only the most corrupt government in the history of the world can devise. Clouding the picture further for homeowners in default is the risk of foreclosure by the wrong party, namely the mortgage servicer - the Bank of Americas, Chases and Citigroups of the world. Since the investors have been paid, the servicing banks are essentially out of the loop, having no standing in a foreclosure proceeding.
The important point is that, for the majority of mortgages in default, the only proper party to entertain a foreclosure proceeding would be Fannie or Freddie. The two have underwritten - or insured and subsequently paid for - about 9 out of 10 mortgages in the United States over the past thirty years. When Fannie or Freddie come calling, homeowners should expect to be out of their homes in record time. The government will probably have little patience with loiterers. They'll also likely not forgive the balances, either, especially in states which allow for deficiency judgments. It should prove to be a lovely decade for housing in America.
Dow 10,268.81, +169.67 (1.68%)
NASDAQ 2,214.19, +30.66 (1.40%)
S&P 500 1,094.87, +19.36 (1.80%)
NYSE Composite 7,013.35, +138.79 (2.02%)
Advancing issued trampled decliners, 4994-1564. There were 250 new highs to 54 new lows, a gap that's likely to widen in coming days as we approach the one-year anniversary of the market bottom on March 9. Expect the new lows to take away the edge by June at the latest as the market gyrates up and down. Volume was about as pathetic as ever. There's no impetus for this rally and it is probably going to be a one or two-day event. Economic reality will make an appearance before the week is out, though it should be mentioned that the same pattern has been playing out fairly steadily for weeks: On Monday, the dollar drops, free money is put into stocks and then gradually withdrawn - at a profit - as the week unfold and the dollar gains. That's the current game: week-to-week, day-to-day, hand-to-mouth.
NYSE Volume 4,737,764,500
NASDAQ Volume 1,954,910,875
Commodities rose without any compelling stimulus. Crude oil shot up to $77.01. Gold struck $1,120.00, a gain of $30. Silver rose 64 cents, to $16.09.
Sell the rally. It won't last.
Friday, February 12, 2010
Your Money Is Being Yanked by Insiders
When CNBC's Maria Bartiroma blurts out, "It's four o'clock on Wall Street; do you know where your money is?" the resounding chorus from average Americans (people who work and make between $12,000 and $75,000 a year - about 65% of the population) should be "NO!" because, in reality, you don't.
Think about it. Your money, or what you believe to be your money, is all over the place. You've got some in your pocket, wallet or purse, in a drawer, a piggy bank, maybe buried in the ground in your back yard or stuffed inside a wall in your house. Some of it may be in a coin or stamp collection, or any other kind of collection. some of it is in the bank, some of it is reflected as credit on credit cards, or a home equity loan. Then there's investments, individual stocks, mutual funds, 401ks, Keogh funds, college funds, retirement funds, and so on.
Add to that the promised or held money, as in pension plans, social security, medicare, payroll withholding taxes, money in health care plans, etc., and you can easily understand that most Americans have no idea where their money really is, and, what's worse, who's using it, for what purposes and when. This is what makes investing absolutely the greatest gamble of your life. Playing roulette with real money you depend upon for anything other than fun is simply foolish. If you're a winning investor (about 12% of individual investors over the past 10 years), you may scoff at the tone of this post, but you have to admit that you sometimes have had doubts.
Watching the foolery on Wall Street this week was a real eye-opener. After Monday's sharp sell-off, there were two major gaps of more than 100 points apiece - on Tuesday's open and today's open - Tuesday up and today down, and six separate "pumping" events (three today) which managed to keep stocks in a fairly tight range and close slightly positive for the week. The scorecard still reads: 2 up weeks and 4 down for the year so far, a discouraging sign.
The various gaps and pumps (typified by large advances over a period of usually less than an hour) were all insider-driven, indicating quite clearly that the individual investor was at the mercy of the insiders and professionals. Anybody who made a dime trading this week who isn't wired directly into the Wall Street elite or a broker or trader, is either a genius or extremely lucky. The deck was so severely stacked against the little guy, he didn't stand a chance. while that's usually the case, this week was particularly volatile, a friendly partner of the pros, forcing more trades and more brokerage commissions while the investor is left holding a bag, suitably deflated.
Dow 10,099.14, -45.05 (0.44%)
NASDAQ 2,183.53, +6.12 (0.28%)
S&P 500 1,075.51, -2.96 (0.27%)
NYSE Composite 6,875.18, -23.54 (0.34%)
As if to throw cold water in the face of the market, advancers managed to finish ahead of decliners, 3398-2998, in opposition to the headline numbers and following an early-session trade which saw declining issues beating gainers by a 6-1 ratio. Truly, on the low volume reading, the market was yanked around by inside elements and manipulators. There is absolutely no doubt about it. There were 154 new highs to 59 new lows. Even though the gap continued to expand this week, the high-low indicator is becoming less and less meaningful as the calendar draws closer to March 9, the one year anniversary of the bottom. Stocks making new lows in comparison to last year have to be real stinkers. The high-low indicator may not make much sense as a trend indicator until maybe June or July.
NYSE Volume 5,202,259,500
NASDAQ Volume 2,168,768,250
Commodities did not participate in the rigged equity rally, and suffered nearly across-the-board losses. Crude oil dipped $1.08, to $74.20. Gold slipped $4.50, to $1,090.20. Silver fell 18 cents, to $15.41.
Besides commodities being stuck in a range, stocks, outside stellar performers and outright losers, haven't budged in 4-5 months. The top was really around Dow 10,300, back in early December. The rest of it on the high side was froth, or waste. The key numbers now are 10,050 and 9900 on the Dow, both of which should be tested within days. With all the turmoil in world markets - Greece, China, Dubai, elsewhere - the major indices are being held together by raw nerve. The inside game is still playing the "recovery" card until they're good and ready to dump out of all positions in a radical race lower.
They may all exit at once or continue the slow, Chinese water torture treatment of two days up and three days down for weeks and weeks, but, unless there's clear resolution on jobs (there aren't any new ones being created) and foreclosures (they continue to rise, year over year), the trend remains down. That's the bad news.
The good news is that there are only 36 days until Spring, baseball players report to Spring training next week and there are exceptional bargains in arable land, tools of trade and certain transportation devices (bicycles are cheap and riding them is very health-promoting). Seeds are - pardon the pun - dirt cheap.
Stop investing and start growing.
Think about it. Your money, or what you believe to be your money, is all over the place. You've got some in your pocket, wallet or purse, in a drawer, a piggy bank, maybe buried in the ground in your back yard or stuffed inside a wall in your house. Some of it may be in a coin or stamp collection, or any other kind of collection. some of it is in the bank, some of it is reflected as credit on credit cards, or a home equity loan. Then there's investments, individual stocks, mutual funds, 401ks, Keogh funds, college funds, retirement funds, and so on.
Add to that the promised or held money, as in pension plans, social security, medicare, payroll withholding taxes, money in health care plans, etc., and you can easily understand that most Americans have no idea where their money really is, and, what's worse, who's using it, for what purposes and when. This is what makes investing absolutely the greatest gamble of your life. Playing roulette with real money you depend upon for anything other than fun is simply foolish. If you're a winning investor (about 12% of individual investors over the past 10 years), you may scoff at the tone of this post, but you have to admit that you sometimes have had doubts.
Watching the foolery on Wall Street this week was a real eye-opener. After Monday's sharp sell-off, there were two major gaps of more than 100 points apiece - on Tuesday's open and today's open - Tuesday up and today down, and six separate "pumping" events (three today) which managed to keep stocks in a fairly tight range and close slightly positive for the week. The scorecard still reads: 2 up weeks and 4 down for the year so far, a discouraging sign.
The various gaps and pumps (typified by large advances over a period of usually less than an hour) were all insider-driven, indicating quite clearly that the individual investor was at the mercy of the insiders and professionals. Anybody who made a dime trading this week who isn't wired directly into the Wall Street elite or a broker or trader, is either a genius or extremely lucky. The deck was so severely stacked against the little guy, he didn't stand a chance. while that's usually the case, this week was particularly volatile, a friendly partner of the pros, forcing more trades and more brokerage commissions while the investor is left holding a bag, suitably deflated.
Dow 10,099.14, -45.05 (0.44%)
NASDAQ 2,183.53, +6.12 (0.28%)
S&P 500 1,075.51, -2.96 (0.27%)
NYSE Composite 6,875.18, -23.54 (0.34%)
As if to throw cold water in the face of the market, advancers managed to finish ahead of decliners, 3398-2998, in opposition to the headline numbers and following an early-session trade which saw declining issues beating gainers by a 6-1 ratio. Truly, on the low volume reading, the market was yanked around by inside elements and manipulators. There is absolutely no doubt about it. There were 154 new highs to 59 new lows. Even though the gap continued to expand this week, the high-low indicator is becoming less and less meaningful as the calendar draws closer to March 9, the one year anniversary of the bottom. Stocks making new lows in comparison to last year have to be real stinkers. The high-low indicator may not make much sense as a trend indicator until maybe June or July.
NYSE Volume 5,202,259,500
NASDAQ Volume 2,168,768,250
Commodities did not participate in the rigged equity rally, and suffered nearly across-the-board losses. Crude oil dipped $1.08, to $74.20. Gold slipped $4.50, to $1,090.20. Silver fell 18 cents, to $15.41.
Besides commodities being stuck in a range, stocks, outside stellar performers and outright losers, haven't budged in 4-5 months. The top was really around Dow 10,300, back in early December. The rest of it on the high side was froth, or waste. The key numbers now are 10,050 and 9900 on the Dow, both of which should be tested within days. With all the turmoil in world markets - Greece, China, Dubai, elsewhere - the major indices are being held together by raw nerve. The inside game is still playing the "recovery" card until they're good and ready to dump out of all positions in a radical race lower.
They may all exit at once or continue the slow, Chinese water torture treatment of two days up and three days down for weeks and weeks, but, unless there's clear resolution on jobs (there aren't any new ones being created) and foreclosures (they continue to rise, year over year), the trend remains down. That's the bad news.
The good news is that there are only 36 days until Spring, baseball players report to Spring training next week and there are exceptional bargains in arable land, tools of trade and certain transportation devices (bicycles are cheap and riding them is very health-promoting). Seeds are - pardon the pun - dirt cheap.
Stop investing and start growing.
Thursday, February 11, 2010
The Diversification Lie
Whenever and wherever investment strategies are the topic of discussion, sure as the sun sets in the West, somebody will open their yap about the need to be diversified, of not having all of your eggs in one basket, of segmenting your portfolio to match your investment style and other such sage advice, all of which serves to increase trading activity, market liquidity, but mostly, the size of your broker's monthly commission check.
Unless you are sufficiently wealthy (in which case, you'd probably be in TIPS or Treasuries or another high-yielding asset class), diversifying your portfolio usually means spreading out your risk over a number of different stocks or a combination of stocks, bonds, mutual funds and money markets. All of this results in a higher transaction rate, good for the financial services industry and bad for you. It's just plain money out of your pocket, and diversification, as has been proven in bear markets and bulls, isn't a safeguard against risk, nor does it help maximize profits. At best, diversified portfolios amplify losses and reduce profitability.
What we'd all like is a couple of dead-nuts winners and no losers. Diversifying, spreading out and trading frequently only reinforces the desire to trade - or, gamble, which is exactly what it always has been and always will be - while virtually guaranteeing mediocre results. The normal result of spreading, if you're lucky, is a couple of winners, a couple of losers and an overall performance that will be somewhere close to the averages. You might as well just buy index funds or play index futures or options, forget everything about charts and fundamentals and timing and just bet one way or the other. Like any other wager, you'll win some and lose some and probably come out a loser, which is how most people doing their own trading end up.
Mediocrity is what keeps brokerages and professionals in business. Sooner or later, all those day-trading wizards burn out because, just like in Las Vegas, they can't beat the house, which on Wall Street is better known as the inside money - the very brokers who use your money to gamble and hedge against. Individual investors surely don't stand a snowball's chance in hell in today's trading environment, when stocks turn on a rumor, phrase or the whim of the inside money, so diversification only accelerates the losing process, all to the great satisfaction of the Fat Cats.
The only way to win in stocks, just like gambling, is to make large, smart moves and make them as infrequently as possible. Buy and hold is still a viable strategy, but the trick is knowing not only what to buy, but when, and when to get out. A single big winner is still the best strategy. All the diversification talk is pure bunk, made for fools who think they're actually "investing."
Get real. Save your money. In a sock. When you've got $100,000, think about how badly you'd feel losing 10 or 20% of it, or more. You'll forget investing and go back to saving. Believe me, I spent years analyzing stocks, markets, investments, the economy and more, and I WON'T PUT A PLUGGED NICKEL INTO STOCKS, mostly because I know the pros still have a huge edge.
Think it over. Do you have 8 to 10 hours a day to plot your moves and act upon them? Do you have other people backing you who will support your trades with trades of their own? Do you have huge sums of money to hedge and cause market runs and momentum shifts? Obviously not.
A case in point is today's rally, yesterday's decline, the rally the day before, the sharp drop the day before that. do you have the stomach for that kind of volatility? Up one minute and down the next? I didn't think so.
Dow 10,144.19, +105.81 (1.05%)
NASDAQ 2,177.41, +29.54 (1.38%)
S&P 500 1,078.47, +10.34 (0.97%)
NYSE Composite 6,898.72, +79.60 (1.17%
Advancing issues beat back decliners, 4874-1598 (3-1); 140 new highs, 65 new lows, still not enough of a spread to call any change in direction. Volume was average.
NYSE Volume 5,165,277,500
NASDAQ Volume 2,149,687,500
Stocks remain in a consolidation phase around Dow 10,000, which could last a few more weeks before a breakdown occurs. Upside potential remains weak due to current economic conditions.
Commodities caught some fire on Thursday, though oil was down 2 cents, to $75.28. Gold added $18.90, to $1,095.20. Silver ended 29 cents higher, at $15.59.
Unless tomorrow is a huge day to the downside, stocks are on track for a winning week, which would end a string of four straight losers. That's a bet worth taking. The only other week stocks finished higher in 2010 was the first week of the year.
Unless you are sufficiently wealthy (in which case, you'd probably be in TIPS or Treasuries or another high-yielding asset class), diversifying your portfolio usually means spreading out your risk over a number of different stocks or a combination of stocks, bonds, mutual funds and money markets. All of this results in a higher transaction rate, good for the financial services industry and bad for you. It's just plain money out of your pocket, and diversification, as has been proven in bear markets and bulls, isn't a safeguard against risk, nor does it help maximize profits. At best, diversified portfolios amplify losses and reduce profitability.
What we'd all like is a couple of dead-nuts winners and no losers. Diversifying, spreading out and trading frequently only reinforces the desire to trade - or, gamble, which is exactly what it always has been and always will be - while virtually guaranteeing mediocre results. The normal result of spreading, if you're lucky, is a couple of winners, a couple of losers and an overall performance that will be somewhere close to the averages. You might as well just buy index funds or play index futures or options, forget everything about charts and fundamentals and timing and just bet one way or the other. Like any other wager, you'll win some and lose some and probably come out a loser, which is how most people doing their own trading end up.
Mediocrity is what keeps brokerages and professionals in business. Sooner or later, all those day-trading wizards burn out because, just like in Las Vegas, they can't beat the house, which on Wall Street is better known as the inside money - the very brokers who use your money to gamble and hedge against. Individual investors surely don't stand a snowball's chance in hell in today's trading environment, when stocks turn on a rumor, phrase or the whim of the inside money, so diversification only accelerates the losing process, all to the great satisfaction of the Fat Cats.
The only way to win in stocks, just like gambling, is to make large, smart moves and make them as infrequently as possible. Buy and hold is still a viable strategy, but the trick is knowing not only what to buy, but when, and when to get out. A single big winner is still the best strategy. All the diversification talk is pure bunk, made for fools who think they're actually "investing."
Get real. Save your money. In a sock. When you've got $100,000, think about how badly you'd feel losing 10 or 20% of it, or more. You'll forget investing and go back to saving. Believe me, I spent years analyzing stocks, markets, investments, the economy and more, and I WON'T PUT A PLUGGED NICKEL INTO STOCKS, mostly because I know the pros still have a huge edge.
Think it over. Do you have 8 to 10 hours a day to plot your moves and act upon them? Do you have other people backing you who will support your trades with trades of their own? Do you have huge sums of money to hedge and cause market runs and momentum shifts? Obviously not.
A case in point is today's rally, yesterday's decline, the rally the day before, the sharp drop the day before that. do you have the stomach for that kind of volatility? Up one minute and down the next? I didn't think so.
Dow 10,144.19, +105.81 (1.05%)
NASDAQ 2,177.41, +29.54 (1.38%)
S&P 500 1,078.47, +10.34 (0.97%)
NYSE Composite 6,898.72, +79.60 (1.17%
Advancing issues beat back decliners, 4874-1598 (3-1); 140 new highs, 65 new lows, still not enough of a spread to call any change in direction. Volume was average.
NYSE Volume 5,165,277,500
NASDAQ Volume 2,149,687,500
Stocks remain in a consolidation phase around Dow 10,000, which could last a few more weeks before a breakdown occurs. Upside potential remains weak due to current economic conditions.
Commodities caught some fire on Thursday, though oil was down 2 cents, to $75.28. Gold added $18.90, to $1,095.20. Silver ended 29 cents higher, at $15.59.
Unless tomorrow is a huge day to the downside, stocks are on track for a winning week, which would end a string of four straight losers. That's a bet worth taking. The only other week stocks finished higher in 2010 was the first week of the year.
Wednesday, February 10, 2010
Bernanke's Naked Put Signals End of Fed
Once upon a time, I owned a fairly successful, profitable newspaper publishing business. Due to events mostly beyond my control the business declined and eventually was bankrupted. During the phase of decline, my father, knowing the challenges and tribulations I faced on a daily basis, used to say, "I don't know how you keep going."
Being a resourceful and resolute sort, I usually replied that the alternative would be to ball up in a corner and cry.
Nowadays, I laugh. I laugh quite a bit. And, what keeps me laughing the most is the outright insanity of the global economy and the people who are supposed to be running it. That idea alone, that a few people, like Fed Chairman Ben Bernanke and heads of foreign central banks, are supposed to keep the global machinery of commerce well-maintained and regulated.
HAHAHAHAHAHAHAHA!!!!! Financial mismanagement of far-flung enterprises, like nations, began with the creation of money, but didn't really gather momentum until the Fed was created in 1913 (just before the Great Depression, I should add) and John Maynard Keynes began commenting and writing on economics. The art was nearly perfected by the expansionist Maestro himself, Alan Greenspan, and is today being expanded to the nth degree of absurdity by Chairman Bernanke.
Today was a literal laugh riot. Bernanke released a transcript of his remarks prepared for testimony before the Committee on Financial Services, U.S. House of Representatives. His actual appearance was postponed since the nation's capitol is currently under two to three feet of snow (this is a probably a good thing that won't last), but Chairman Ben decided to unveil it today, since he probably wanted to get the blueprint outlining the devastation of a nation's finances out for inspection by his central banker buddies around the world.
The text of his remarks, lined above, reads like a fantasy. It is almost all fiction and represents the hopes and prayers of the fed Chariman, because, technically, with the federal funds rate essentially at zero and there being no economic conditions which would cause the FOMC to change its policy stance, i.e., raising the rate, the Fed has NO WAY TO INFLUENCE INTEREST RATES.
What our ingenious Chairman has suggested in this little piece of fiction, is that interest rate policy will be tied to interest paid on member bank reserves. In other words, Bernanke has suggested a game-changer because the usual federal funds rate is going to stay at ZERO for much longer than he or anyone else in the banking industry ever imagined it would.
Essentially, he's saying - despite his claims that the economy is improving - that conditions continue to deteriorate and will continue to deteriorate for as far as the eye can see. Inside his veiled statement of "change" (we've heard that one before) is the seed of truth: the Fed has failed in its responsibility to promote a sound economy and stable prices. They have been unable to shake loose from their accommodative posture because the debt burden is still too severe and getting worse.
The only way out for them is to pay interest on their money they themselves hold and hope that credit markets respond in kind to yet another inflationary gesture. In all probability, it won't work, for two good reasons. First, the entire structure of the Fed is based on lending out money at interest, not paying interest on money held in reserve. Their plan is entirely a chimera, a sham, a puppet show. Second, the private markets will not adjust to the "new, improved" interest-on-reserves-as-the-basis-for-all-lending program. Markets, regional and local, have their own priorities and standards and will shake free from the Fed umbrella. Growing markets will encourage higher interest rates. Slowing or stagnant markets, that being most of the nation, will not be able to raise rates with any success.
Bernanke's plan is as boneheaded as most of the ideas spawned by the minds of these Lilliputian thinkers. More than anything else, the Chairman has issued the first statement signaling the end of the Federal Reserve. He admits that the economy's problems began in August of 2007, as I have repeatedly stated at various times on this blog and elsewhere. His highly-fictionalized account of the proceeding events fail to hide the fact that the Fed and his counterparts at the US Treasury have been entirely unable to correct the prevailing conditions of decline.
He is admitting defeat, The US economic system, as it has been engineered by the Federal Reserve, is broken beyond repair. The fed funds rate is ZERO, and will remain at ZERO forever, or, until the Federal Reserve Act is either amended or revoked. Since the Federal Reserve Act did not include a charter or set term for the operation of the Fed, there is no renewal or expiration. They operate in perpetuity, thus, the only way to dispose of or abolish this abominable creation is by an act of congress, so don't hold your breath. By the time the numbskulls in DC come to the realization that the Fed has bankrupted the nation, it will be too late. Besides, the federal government has done their own demolition job with entitlements, deficits and the burgeoning national debt.
In 2007, I suggested taking all money out of the stock market and putting it into cash. This new twist on the entire structure of money reinforces my ideas from yesterday that the only place to put money now is in foodstocks that can be stored, reliable transportation, clothing, arable land and tools of trade. Obviously, an investment in a sewing machine or any kind of gardening instrument would be a worthwhile use of your money in light of today's developments.
The Fed's failure may result in very unusual movements in currency markets. An absolute breakdown of global trade is not out of the question as more and more individuals and countries question the viability of fiat currencies as a whole. The alternatives to our busted system of credit are gold, silver and barter. However, since gold and silver have been highly commoditized and traded as investments, they may be less reliable as stores of wealth as their values should fall along with all other asset classes, albeit to a lesser degree. Add to the list, seeds, for vegetables. They're cheap, and everybody needs to eat more veggies.
The market reaction to Bernanke's comments, released about 10:00 am, was complete horror. Stocks immediately sold off on the very thought that the fed would even consider ending their free-money regime. Cooler heads prevailed, however, sending stocks back up and into a stable area for much of the remaining session. Overhanging everything was the snowstorm ravaging the East coast, which kept Washington shut down and many traders away from their desks. Volume was a dribble and the major indices ended the day without much change, though all were down.
Dow 10,038.38, -20.26 (0.20%)
NASDAQ 2,147.87, -3.00 (0.14%)
S&P 500 1,068.13, -2.39 (0.22%)
NYSE Composite 6,819.12, -16.04 (0.23%)
Declining issues beat advancers, 3271-3086. New highs: 113; New lows: 53. Still no perceptible break in these indicators. Volume was on the low side.
NYSE Volume 4,982,940,500
NASDAQ Volume 2,039,927,875
Commodities were split. Crude oil gained 17 cents, to $74.69. That's about to change. Look for crude at $65 within months, possibly sooner and possibly lower. Gold lost $1.10, to $1,076.10. Silver edged down 11 cents, to $15.33.
Just to reinforce how grossly mismanaged the US economy is, I cite this mainstream article, called, Is America about to go broke?, a brief, yet exceptional insight to the unfunded liabilities of Social Security and Medicare by Scott Burns.
Having previously written on this topic just a few days or weeks ago, I discovered that the unfunded liabilities were an amorphous blob, with estimates ranging from $69 to $99 trillion. Burns pegs it at a "mere" $42.9 trillion, citing the actual 2008 Trustee's Report as his source. Burns makes more claims in his article, the most compelling being that the total expense for SS and Medicare will outstrip revenue sometime between 2010 and 2015. Previous estimates had this date pegged as 2037, quite a few years off. Burns also pegs Alan Greenspan as the architect for the detonation of the entitlement time bomb, a point on which he is probably correct.
But then Burns makes the leap to inflation, purporting that in order to keep the payments system going, the Fed will have to print more money. That's where he and I part company. The Fed has been printing money as fast as it can for years. Inflation has not occurred because the banks are hoarding it, keeping an ungodly amount as reserves within the Federal Reserve. Just printing money doesn't cause inflation. It has to be put into circulation, and currently, its not. And, as we learned today, the Fed is going to pay interest on all this money the banks have stored within the Fed as reserves. There's the final solution. The US economy is kaput, forcibly being thrown down a deflationist hole by the Federal Reserve and its member banks.
The plan by the Fed is ingenious, yet utterly transparent. They'll inflate when they see fit. When they have every mortgage in America underwater, when real estate values have plummeted to 30-40% of what they are today, that's when they'll release a torrent of previously-reserved money as they buy up every depressed property in America, converting the nation's most valuable assets from the hands of homeowners, Fannie Mae and Freddie Mac, to their own. Oh, yes, and then, once Americans already have been forced out of their homes, the prices of everything - from food, to fuel to every imported good - will rise out of their buying range.
Yes, we will have inflation, but not before we encounter years and years of crushing deflation.
I'm not laughing as hard as I was earlier, because the conditions are dire indeed. However, the proposed solutions and what passes today for economic analysis are absolutely side-splitting.
Being a resourceful and resolute sort, I usually replied that the alternative would be to ball up in a corner and cry.
Nowadays, I laugh. I laugh quite a bit. And, what keeps me laughing the most is the outright insanity of the global economy and the people who are supposed to be running it. That idea alone, that a few people, like Fed Chairman Ben Bernanke and heads of foreign central banks, are supposed to keep the global machinery of commerce well-maintained and regulated.
HAHAHAHAHAHAHAHA!!!!! Financial mismanagement of far-flung enterprises, like nations, began with the creation of money, but didn't really gather momentum until the Fed was created in 1913 (just before the Great Depression, I should add) and John Maynard Keynes began commenting and writing on economics. The art was nearly perfected by the expansionist Maestro himself, Alan Greenspan, and is today being expanded to the nth degree of absurdity by Chairman Bernanke.
Today was a literal laugh riot. Bernanke released a transcript of his remarks prepared for testimony before the Committee on Financial Services, U.S. House of Representatives. His actual appearance was postponed since the nation's capitol is currently under two to three feet of snow (this is a probably a good thing that won't last), but Chairman Ben decided to unveil it today, since he probably wanted to get the blueprint outlining the devastation of a nation's finances out for inspection by his central banker buddies around the world.
The text of his remarks, lined above, reads like a fantasy. It is almost all fiction and represents the hopes and prayers of the fed Chariman, because, technically, with the federal funds rate essentially at zero and there being no economic conditions which would cause the FOMC to change its policy stance, i.e., raising the rate, the Fed has NO WAY TO INFLUENCE INTEREST RATES.
What our ingenious Chairman has suggested in this little piece of fiction, is that interest rate policy will be tied to interest paid on member bank reserves. In other words, Bernanke has suggested a game-changer because the usual federal funds rate is going to stay at ZERO for much longer than he or anyone else in the banking industry ever imagined it would.
Essentially, he's saying - despite his claims that the economy is improving - that conditions continue to deteriorate and will continue to deteriorate for as far as the eye can see. Inside his veiled statement of "change" (we've heard that one before) is the seed of truth: the Fed has failed in its responsibility to promote a sound economy and stable prices. They have been unable to shake loose from their accommodative posture because the debt burden is still too severe and getting worse.
The only way out for them is to pay interest on their money they themselves hold and hope that credit markets respond in kind to yet another inflationary gesture. In all probability, it won't work, for two good reasons. First, the entire structure of the Fed is based on lending out money at interest, not paying interest on money held in reserve. Their plan is entirely a chimera, a sham, a puppet show. Second, the private markets will not adjust to the "new, improved" interest-on-reserves-as-the-basis-for-all-lending program. Markets, regional and local, have their own priorities and standards and will shake free from the Fed umbrella. Growing markets will encourage higher interest rates. Slowing or stagnant markets, that being most of the nation, will not be able to raise rates with any success.
Bernanke's plan is as boneheaded as most of the ideas spawned by the minds of these Lilliputian thinkers. More than anything else, the Chairman has issued the first statement signaling the end of the Federal Reserve. He admits that the economy's problems began in August of 2007, as I have repeatedly stated at various times on this blog and elsewhere. His highly-fictionalized account of the proceeding events fail to hide the fact that the Fed and his counterparts at the US Treasury have been entirely unable to correct the prevailing conditions of decline.
He is admitting defeat, The US economic system, as it has been engineered by the Federal Reserve, is broken beyond repair. The fed funds rate is ZERO, and will remain at ZERO forever, or, until the Federal Reserve Act is either amended or revoked. Since the Federal Reserve Act did not include a charter or set term for the operation of the Fed, there is no renewal or expiration. They operate in perpetuity, thus, the only way to dispose of or abolish this abominable creation is by an act of congress, so don't hold your breath. By the time the numbskulls in DC come to the realization that the Fed has bankrupted the nation, it will be too late. Besides, the federal government has done their own demolition job with entitlements, deficits and the burgeoning national debt.
In 2007, I suggested taking all money out of the stock market and putting it into cash. This new twist on the entire structure of money reinforces my ideas from yesterday that the only place to put money now is in foodstocks that can be stored, reliable transportation, clothing, arable land and tools of trade. Obviously, an investment in a sewing machine or any kind of gardening instrument would be a worthwhile use of your money in light of today's developments.
The Fed's failure may result in very unusual movements in currency markets. An absolute breakdown of global trade is not out of the question as more and more individuals and countries question the viability of fiat currencies as a whole. The alternatives to our busted system of credit are gold, silver and barter. However, since gold and silver have been highly commoditized and traded as investments, they may be less reliable as stores of wealth as their values should fall along with all other asset classes, albeit to a lesser degree. Add to the list, seeds, for vegetables. They're cheap, and everybody needs to eat more veggies.
The market reaction to Bernanke's comments, released about 10:00 am, was complete horror. Stocks immediately sold off on the very thought that the fed would even consider ending their free-money regime. Cooler heads prevailed, however, sending stocks back up and into a stable area for much of the remaining session. Overhanging everything was the snowstorm ravaging the East coast, which kept Washington shut down and many traders away from their desks. Volume was a dribble and the major indices ended the day without much change, though all were down.
Dow 10,038.38, -20.26 (0.20%)
NASDAQ 2,147.87, -3.00 (0.14%)
S&P 500 1,068.13, -2.39 (0.22%)
NYSE Composite 6,819.12, -16.04 (0.23%)
Declining issues beat advancers, 3271-3086. New highs: 113; New lows: 53. Still no perceptible break in these indicators. Volume was on the low side.
NYSE Volume 4,982,940,500
NASDAQ Volume 2,039,927,875
Commodities were split. Crude oil gained 17 cents, to $74.69. That's about to change. Look for crude at $65 within months, possibly sooner and possibly lower. Gold lost $1.10, to $1,076.10. Silver edged down 11 cents, to $15.33.
Just to reinforce how grossly mismanaged the US economy is, I cite this mainstream article, called, Is America about to go broke?, a brief, yet exceptional insight to the unfunded liabilities of Social Security and Medicare by Scott Burns.
Having previously written on this topic just a few days or weeks ago, I discovered that the unfunded liabilities were an amorphous blob, with estimates ranging from $69 to $99 trillion. Burns pegs it at a "mere" $42.9 trillion, citing the actual 2008 Trustee's Report as his source. Burns makes more claims in his article, the most compelling being that the total expense for SS and Medicare will outstrip revenue sometime between 2010 and 2015. Previous estimates had this date pegged as 2037, quite a few years off. Burns also pegs Alan Greenspan as the architect for the detonation of the entitlement time bomb, a point on which he is probably correct.
But then Burns makes the leap to inflation, purporting that in order to keep the payments system going, the Fed will have to print more money. That's where he and I part company. The Fed has been printing money as fast as it can for years. Inflation has not occurred because the banks are hoarding it, keeping an ungodly amount as reserves within the Federal Reserve. Just printing money doesn't cause inflation. It has to be put into circulation, and currently, its not. And, as we learned today, the Fed is going to pay interest on all this money the banks have stored within the Fed as reserves. There's the final solution. The US economy is kaput, forcibly being thrown down a deflationist hole by the Federal Reserve and its member banks.
The plan by the Fed is ingenious, yet utterly transparent. They'll inflate when they see fit. When they have every mortgage in America underwater, when real estate values have plummeted to 30-40% of what they are today, that's when they'll release a torrent of previously-reserved money as they buy up every depressed property in America, converting the nation's most valuable assets from the hands of homeowners, Fannie Mae and Freddie Mac, to their own. Oh, yes, and then, once Americans already have been forced out of their homes, the prices of everything - from food, to fuel to every imported good - will rise out of their buying range.
Yes, we will have inflation, but not before we encounter years and years of crushing deflation.
I'm not laughing as hard as I was earlier, because the conditions are dire indeed. However, the proposed solutions and what passes today for economic analysis are absolutely side-splitting.
Tuesday, February 9, 2010
Panic Buying on Rumored Greece Debt Solution
Now that there's a rumor that Germany will bail out Greece from its long-term debt problems, it must be not only safe, but profitable, to invest in equities.
This is what substitutes for logic on Wall Street. A country of roughly 11 million, the government of Greece is having serious difficulties financing its debt burden, a fact that has not been lost on EU officials, the European Central Bank, or, your friendly, neighborhood shysters and hooligans in the investment business.
Normally, credit default of an entire nation is serious business. These days, rumors that somebody will issue more debt to "keep them afloat" is supposed to signal that better days lie ahead, not only for the beleaguered nation, but for the entire planet.
Nothing could be further from the truth and those who bought into today's rally were probably well aware of the risks involved with investing in anything at such a precarious economic juncture. Either that, or most investors are really just sheep being led to slaughter.
There's almost no way to put a positive spin on debt restructuring of a country roughly the size and population of New York; its yet another sad chapter in the all-pervasive world-wide debt bomb. Just as they have for the past year, cheery optimists claim that economies will rebound soon and all will be well. Global demand will improve with better economic conditions prevailing globally. Sadly, these prognostications of some recovery, rebound or reflation are little more then idle pipe dreams of crack-smoking Keynesian economists. More sober heads are pointing to Portugal, Italy, Greece and Spain (the PIGS as they are known) as the beginning of the end of not only the Euro as a viable currency, but for a continuation of the debt-leveraging that has led the global economy down the abyss.
Eventually, there must be losses in order to purge all the mal-investments made over the last 10-20 years - though mostly in the last 6 to 8 - and restore correct economic balance to the entire global system. These losses include everything from credit card defaults to mortgage write-downs to underfunded pension funds to failed governments. Everyone, from individuals to banks to governments and their currencies is going to take a hit, some ore severe than others. It's not very easy to do, certainly isn't pretty, but debt default will eventually restore - and much quicker, by the way - economies to reasonable levels of functionality. Until the debts are expunged, paid off, paid down, or otherwise disposed of, there can be no hope for any kind of lasting recovery and economic stability.
That's the part most "modern" economists just don't seem to get. Either that, or they know it and are just lining their cards up properly. My best guess is that the global economy is about 1/3 of the way through a process that began in August of 2007. Although it took awhile (a little over a year) before most people took notice, the de-levering had begun when real estate values began to slip. Then, by 2008, stocks took their hit (and subsequently recovered, but understand that this cyclical rally within a secular bear market has great downside risk later on), and the banks cried and wailed though gobs of taxpayer money, most of which is still owed.
By August of 2010, the world will be 3 years into the abyss and nowhere near the bottom, such bottom being measured as widespread unemployment which will dwarf what is prevalent today, homelessness, fear and, for some, starvation and death. That doomsday scenario is probably another 2-3 years away, possibly longer, depending on how long governments can hold onto whatever small shards of credibility they have before bombing and attacking each other.
Wars are the usual method by which the great powers sort out their financial differences, though these days, cyber-warfare is already well-underway as is various forms of economic ju-jitsu. You think Greece owing debt to Germany is such a good idea? Read up on some financial history prior to great wars and you'll get a little education. The aftermath of wars isn't such a rosy picture either, but we'll be getting to that - if still alive - upon the events.
For now, the best "investments" would be cash, clothing, transportation devices, canned food, arable land and tools of trades. All can be procured relatively cheaply and will serve one well in crisis conditions, for which, I believe, we are headed.
For today, investors thought stocks were hot and Greece wasn't much of a big deal. A few months and years from now, that thinking is likely to be looked back upon as foolish, unfounded optimism.
Dow 10,058.64, +150.25 (1.52%)
NASDAQ 2,150.87, +24.82 (1.17%)
S&P 500 1,070.52, +13.78 (1.30%)
NYSE Composite 6,835.16, +121.29 (1.81%)
Advancing issues finally had a day in which they exceeded decliners by a large margin, 4864-1651. There were 114 new highs as compared to 79 new lows. The divergence is still not great enough - and only one day's data - to conclude anything other than the negative bias remains in place. Volume was approaching the higher range, though despite the overall price gains, not equal to the volume on recent down days. We're likely to trend sideways to lower until a suitable catalyst provokes a movement in another direction. This market condition could persist for quite a long time as governments and media efforts seek to keep panic from occurring though future events may preclude them from doing so.
NYSE Volume 6,145,856,000
NASDAQ Volume 2,242,082,250
Oil, gold, silver and most other commodities improved. Despite today's moves, the overwhelming evidence of a widespread, nearly global deflationary environment continues to spread.
Governments and financial institutions have been proceeding at a snail's pace, putting profits before repair and political careers ahead of practical concerns. The recession isn't over, though some of the worst of it is. This second phase may last 2-4 years from here before true structural reforms - not yet even begun - start to have any affect on economies.
To get an idea of just how hard government and financial institutions and regulators are sitting on their collective hands, here's Larry Summers, White House Director of the National Economic Council and architect of the financial collapse, prattling on for 10 minutes on CNBC this morning, essentially saying nothing. Notice how his lips move but no meaningful words come out.
This is what substitutes for logic on Wall Street. A country of roughly 11 million, the government of Greece is having serious difficulties financing its debt burden, a fact that has not been lost on EU officials, the European Central Bank, or, your friendly, neighborhood shysters and hooligans in the investment business.
Normally, credit default of an entire nation is serious business. These days, rumors that somebody will issue more debt to "keep them afloat" is supposed to signal that better days lie ahead, not only for the beleaguered nation, but for the entire planet.
Nothing could be further from the truth and those who bought into today's rally were probably well aware of the risks involved with investing in anything at such a precarious economic juncture. Either that, or most investors are really just sheep being led to slaughter.
There's almost no way to put a positive spin on debt restructuring of a country roughly the size and population of New York; its yet another sad chapter in the all-pervasive world-wide debt bomb. Just as they have for the past year, cheery optimists claim that economies will rebound soon and all will be well. Global demand will improve with better economic conditions prevailing globally. Sadly, these prognostications of some recovery, rebound or reflation are little more then idle pipe dreams of crack-smoking Keynesian economists. More sober heads are pointing to Portugal, Italy, Greece and Spain (the PIGS as they are known) as the beginning of the end of not only the Euro as a viable currency, but for a continuation of the debt-leveraging that has led the global economy down the abyss.
Eventually, there must be losses in order to purge all the mal-investments made over the last 10-20 years - though mostly in the last 6 to 8 - and restore correct economic balance to the entire global system. These losses include everything from credit card defaults to mortgage write-downs to underfunded pension funds to failed governments. Everyone, from individuals to banks to governments and their currencies is going to take a hit, some ore severe than others. It's not very easy to do, certainly isn't pretty, but debt default will eventually restore - and much quicker, by the way - economies to reasonable levels of functionality. Until the debts are expunged, paid off, paid down, or otherwise disposed of, there can be no hope for any kind of lasting recovery and economic stability.
That's the part most "modern" economists just don't seem to get. Either that, or they know it and are just lining their cards up properly. My best guess is that the global economy is about 1/3 of the way through a process that began in August of 2007. Although it took awhile (a little over a year) before most people took notice, the de-levering had begun when real estate values began to slip. Then, by 2008, stocks took their hit (and subsequently recovered, but understand that this cyclical rally within a secular bear market has great downside risk later on), and the banks cried and wailed though gobs of taxpayer money, most of which is still owed.
By August of 2010, the world will be 3 years into the abyss and nowhere near the bottom, such bottom being measured as widespread unemployment which will dwarf what is prevalent today, homelessness, fear and, for some, starvation and death. That doomsday scenario is probably another 2-3 years away, possibly longer, depending on how long governments can hold onto whatever small shards of credibility they have before bombing and attacking each other.
Wars are the usual method by which the great powers sort out their financial differences, though these days, cyber-warfare is already well-underway as is various forms of economic ju-jitsu. You think Greece owing debt to Germany is such a good idea? Read up on some financial history prior to great wars and you'll get a little education. The aftermath of wars isn't such a rosy picture either, but we'll be getting to that - if still alive - upon the events.
For now, the best "investments" would be cash, clothing, transportation devices, canned food, arable land and tools of trades. All can be procured relatively cheaply and will serve one well in crisis conditions, for which, I believe, we are headed.
For today, investors thought stocks were hot and Greece wasn't much of a big deal. A few months and years from now, that thinking is likely to be looked back upon as foolish, unfounded optimism.
Dow 10,058.64, +150.25 (1.52%)
NASDAQ 2,150.87, +24.82 (1.17%)
S&P 500 1,070.52, +13.78 (1.30%)
NYSE Composite 6,835.16, +121.29 (1.81%)
Advancing issues finally had a day in which they exceeded decliners by a large margin, 4864-1651. There were 114 new highs as compared to 79 new lows. The divergence is still not great enough - and only one day's data - to conclude anything other than the negative bias remains in place. Volume was approaching the higher range, though despite the overall price gains, not equal to the volume on recent down days. We're likely to trend sideways to lower until a suitable catalyst provokes a movement in another direction. This market condition could persist for quite a long time as governments and media efforts seek to keep panic from occurring though future events may preclude them from doing so.
NYSE Volume 6,145,856,000
NASDAQ Volume 2,242,082,250
Oil, gold, silver and most other commodities improved. Despite today's moves, the overwhelming evidence of a widespread, nearly global deflationary environment continues to spread.
Governments and financial institutions have been proceeding at a snail's pace, putting profits before repair and political careers ahead of practical concerns. The recession isn't over, though some of the worst of it is. This second phase may last 2-4 years from here before true structural reforms - not yet even begun - start to have any affect on economies.
To get an idea of just how hard government and financial institutions and regulators are sitting on their collective hands, here's Larry Summers, White House Director of the National Economic Council and architect of the financial collapse, prattling on for 10 minutes on CNBC this morning, essentially saying nothing. Notice how his lips move but no meaningful words come out.
Monday, February 8, 2010
Thain at CIT; Stocks in a Funk
Obviously, John Thain is a hired henchman of the crime syndicate responsible for the financial meltdown of 2008, and all the associated scandals, including TARP, that were ancillary and antecedent to that event.
Why do I make such an overt claim, and just who is John Thain?
Well, John Thain has been around the Wall Street crime syndicate long enough to have attained a position of some authority within that circle. According to this article, Thain was the last chairman and chief executive officer of Merrill Lynch before its merger with Bank of America. Thain managed to get $29 per share ($50 billion) for Merrill, a 70% premium over its market price. Ken Lewis, then CEO of Bank of America, is currently under investigation by the NY State Attorney General, Andrew Cuomo.
Prior to being at Merrill, Thain was president of the NYSE, from 2004 through 2007, meaning he oversaw much of the wheeling and dealing on the exchange and also turned a blind eye to the criminal practices of Bernard Madoff. Prior to that, Thain was at Goldman Sachs, as head of the mortgage desk from 1985 to 1990, and president and co-COO from 1999 to 2004.
Given his history, it's surprising that Thain isn't Secretary of the Treasury or head of one of the regional Federal Reserves, but that's probably because John Thain is basically a bag man. He hides money for his friends. So, what better place for him to resurface after his sudden departure from Merrill Lynch (after he helped inflate its value and 11 top brokers fled to London) in January 2009, than at the beleaguered commercial lender, CIT.
Today, Thain was named CEO of CIT, apparently because CIT's bankruptcy has not worked out to full advantage for the syndicate. Thain will make sure that taxpayers are screwed some more, as one would suppose that stealing $2.3 billion, via TARP would be considered small peanuts in his circles.
With Thain at CIT, one should expect all manner of nastiness, including, but not limited to, falsified accounting, seizure of assets, pleas to the federal government for more bailout money and other not-so-niceties. If John Thain is running a company, one can only expect what he's always provided: fraud, falsity, obfuscation of facts, missing money, missing documents and generally, another round of financial panic.
You have been duly warned. With his track record or greed (he's one of the highest paid on Wall St.) and reputation (a lot of people will speak highly of him in public, because crossing him or the people he's associated with could be harmful to one's health - financial and otherwise) Thain should not be trusted. In any case, having him at CIT virtually assures that financial stocks will be hammered and the economy will suffer through a reprise of the fall of 2008.
With that as background, stocks, led by, you guessed it, large banks, generally fell, putting to rest any notion that Friday's 180-point "turnaround" was anything other than intervention by the PPT (Thain's buddies). It's been 18 months since the breakdown of finance, and since nothing's been done to fix the system - though the bankers and various federal government officials will tell you that MUCH has been done - the usual crowd is back for another round of feeding at investor and taxpayer expense.
Their greed knows no bounds. Not content with breaking the global financial system, they're committed to plunging much of the world - particularly the rich United States of America - into a financial holocaust. Naturally, none of the widespread carnage will affect any of them; they will be above the fray, sitting like vultures with cash in hand to buy up distressed assets at bargain-basement prices. Their true goal is to incite anarchy and revolt, and they're doing a nice job of it thus far. Don't think for a moment that Sarah Palin addressing the Tea Party Convention this weekend was an accident. If the American public is too squeamish to foment revolution, they've got Palin, the absolute perfect Manchurian Candidate, to push us over the edge.
Already, the Tea Parties, originally an amalgamation of loosely-aligned local groups opposed to bank bailouts and financial fraud, have devolved into right-wing bravado-fests, complete with guns, anti-government (and anti-democrat) signs and the tacit support of the the likes of Rush Limbaugh, Sean Hannity and FOX News.
It's a two-pronged attack on liberty and rights, using politics and money to separate middle-class people from theirs. The ultimate goal is a state of neo-anarchy and martial law in America, and they're well on their way.
Dow 9,908.39, -103.84 (1.04%)
NASDAQ 2,126.05, -15.07 (0.70%)
S&P 500 1,066.18, -0.01 (0.00%)
NYSE Composite 6,713.87, -68.88 (1.02%)
Advancing issues were trampled upon by decliners, 4120-2442. New highs actually eked out a slight edge over new lows, 86-73, but volume was light, since all the big money already exited on Friday.
NYSE Volume 4,913,621,000
NASDAQ Volume 2,059,284,875
Commodities staged a little bit of a comeback. Oil, gold and silver all finished their trading sessions slightly higher.
The repugnant conditions which prevail in America today have long ceased being casual conspiracy banter or any kind of laughing matter. Lawlessness prevails. Rules, if there are any, are made up on the fly, to suit those who seek to break them. More than just your money is at risk. Beware.
Why do I make such an overt claim, and just who is John Thain?
Well, John Thain has been around the Wall Street crime syndicate long enough to have attained a position of some authority within that circle. According to this article, Thain was the last chairman and chief executive officer of Merrill Lynch before its merger with Bank of America. Thain managed to get $29 per share ($50 billion) for Merrill, a 70% premium over its market price. Ken Lewis, then CEO of Bank of America, is currently under investigation by the NY State Attorney General, Andrew Cuomo.
Prior to being at Merrill, Thain was president of the NYSE, from 2004 through 2007, meaning he oversaw much of the wheeling and dealing on the exchange and also turned a blind eye to the criminal practices of Bernard Madoff. Prior to that, Thain was at Goldman Sachs, as head of the mortgage desk from 1985 to 1990, and president and co-COO from 1999 to 2004.
Given his history, it's surprising that Thain isn't Secretary of the Treasury or head of one of the regional Federal Reserves, but that's probably because John Thain is basically a bag man. He hides money for his friends. So, what better place for him to resurface after his sudden departure from Merrill Lynch (after he helped inflate its value and 11 top brokers fled to London) in January 2009, than at the beleaguered commercial lender, CIT.
Today, Thain was named CEO of CIT, apparently because CIT's bankruptcy has not worked out to full advantage for the syndicate. Thain will make sure that taxpayers are screwed some more, as one would suppose that stealing $2.3 billion, via TARP would be considered small peanuts in his circles.
With Thain at CIT, one should expect all manner of nastiness, including, but not limited to, falsified accounting, seizure of assets, pleas to the federal government for more bailout money and other not-so-niceties. If John Thain is running a company, one can only expect what he's always provided: fraud, falsity, obfuscation of facts, missing money, missing documents and generally, another round of financial panic.
You have been duly warned. With his track record or greed (he's one of the highest paid on Wall St.) and reputation (a lot of people will speak highly of him in public, because crossing him or the people he's associated with could be harmful to one's health - financial and otherwise) Thain should not be trusted. In any case, having him at CIT virtually assures that financial stocks will be hammered and the economy will suffer through a reprise of the fall of 2008.
With that as background, stocks, led by, you guessed it, large banks, generally fell, putting to rest any notion that Friday's 180-point "turnaround" was anything other than intervention by the PPT (Thain's buddies). It's been 18 months since the breakdown of finance, and since nothing's been done to fix the system - though the bankers and various federal government officials will tell you that MUCH has been done - the usual crowd is back for another round of feeding at investor and taxpayer expense.
Their greed knows no bounds. Not content with breaking the global financial system, they're committed to plunging much of the world - particularly the rich United States of America - into a financial holocaust. Naturally, none of the widespread carnage will affect any of them; they will be above the fray, sitting like vultures with cash in hand to buy up distressed assets at bargain-basement prices. Their true goal is to incite anarchy and revolt, and they're doing a nice job of it thus far. Don't think for a moment that Sarah Palin addressing the Tea Party Convention this weekend was an accident. If the American public is too squeamish to foment revolution, they've got Palin, the absolute perfect Manchurian Candidate, to push us over the edge.
Already, the Tea Parties, originally an amalgamation of loosely-aligned local groups opposed to bank bailouts and financial fraud, have devolved into right-wing bravado-fests, complete with guns, anti-government (and anti-democrat) signs and the tacit support of the the likes of Rush Limbaugh, Sean Hannity and FOX News.
It's a two-pronged attack on liberty and rights, using politics and money to separate middle-class people from theirs. The ultimate goal is a state of neo-anarchy and martial law in America, and they're well on their way.
Dow 9,908.39, -103.84 (1.04%)
NASDAQ 2,126.05, -15.07 (0.70%)
S&P 500 1,066.18, -0.01 (0.00%)
NYSE Composite 6,713.87, -68.88 (1.02%)
Advancing issues were trampled upon by decliners, 4120-2442. New highs actually eked out a slight edge over new lows, 86-73, but volume was light, since all the big money already exited on Friday.
NYSE Volume 4,913,621,000
NASDAQ Volume 2,059,284,875
Commodities staged a little bit of a comeback. Oil, gold and silver all finished their trading sessions slightly higher.
The repugnant conditions which prevail in America today have long ceased being casual conspiracy banter or any kind of laughing matter. Lawlessness prevails. Rules, if there are any, are made up on the fly, to suit those who seek to break them. More than just your money is at risk. Beware.
Friday, February 5, 2010
PPT Fingerprints All Over Late-Day Rally
If you're unfamiliar with the term "PPT," you haven't been reading about economic conditions very deeply. The Plunge protection Team (PPT) stems from a presidential order (Reagan) that gives the Treasury Secretary, Fed Chairman and others extraordinary powers to combat financial firestorms, one of which is direct intervention into capital and equity markets, and, presumably, any other market.
Stocks began the day trying to overcome the lingering effects of Thursday's drubbing, and, after January Non-farms payroll data turned out to be more confusing than anything else, began to sell off, until, by 2:00 pm, the Dow had sunk another 167 points, pounding resistance. The S&P, already shattered, was being likewise battered.
That, however, proved to be the bottom for the day, and the week. Stocks quickly re-gathered and regained momentum without any catalyst, a tell-tale sign of intervention, something the PPT has been doing with regularity since 2000. From 3:00 to 3:15 pm, the Dow gained 100 points, putting the index near unchanged. The rest of the session was spent by the underpinning PPT and their henchmen making sure the Dow finished above 10,000 (it did) and all fears would be soothed over the weekend.
Their work is a fool's gambit, always has been and always will be. The problem is that they can play it because nobody is auditing them or their activities. The banks and the superstructure above it are irresponsible because they've been allowed to be and they will continue to be irresponsible until they destroy the economic system (almost did) or are destroyed themselves. But don't start holding your breath. The powers that be are incredible entrenched. Prepare for the worst four years of your economic life.
Dow 10,012.23, +10.05 (0.10%)
NASDAQ 2,141.12, +15.69 (0.74%)
S&P 500 1,066.19, +3.08 (0.29%)
NYSE Composite 6,782.75, -5.11 (0.08%)
As more evidence of the manipulative element in today's trading, consider that decliners beat advancers handily, 3476-3039. 149 new lows beat 96 new highs. Both of those indicators are contrary to the headline numbers. Volume was magnificent, owing both the the depth of selling and to the amount of financial heft necessary to keep the market from collapsing. But make no mistake about it. The decline will continue. The markets put in new lows which must be tested before any meaningful advance can occur. Chances are, today's lows will be surpassed to the downside within short order. Todays' reprieve was only necessary to avert a panic and to give insiders more opportunity to profit from the next leg down.
NYSE Volume 7,762,321,000
NASDAQ Volume 2,836,146,250
Oil closed at $71.19, down $2.98, at its lowest price since mid-December. Gold finished down $9.50, at $1,053.50 and silver finished down 47 cents, at $14.88. The commodities were only benefitted after their New York closes, not quite as fortunate as the equity markets.
Stocks began the day trying to overcome the lingering effects of Thursday's drubbing, and, after January Non-farms payroll data turned out to be more confusing than anything else, began to sell off, until, by 2:00 pm, the Dow had sunk another 167 points, pounding resistance. The S&P, already shattered, was being likewise battered.
That, however, proved to be the bottom for the day, and the week. Stocks quickly re-gathered and regained momentum without any catalyst, a tell-tale sign of intervention, something the PPT has been doing with regularity since 2000. From 3:00 to 3:15 pm, the Dow gained 100 points, putting the index near unchanged. The rest of the session was spent by the underpinning PPT and their henchmen making sure the Dow finished above 10,000 (it did) and all fears would be soothed over the weekend.
Their work is a fool's gambit, always has been and always will be. The problem is that they can play it because nobody is auditing them or their activities. The banks and the superstructure above it are irresponsible because they've been allowed to be and they will continue to be irresponsible until they destroy the economic system (almost did) or are destroyed themselves. But don't start holding your breath. The powers that be are incredible entrenched. Prepare for the worst four years of your economic life.
Dow 10,012.23, +10.05 (0.10%)
NASDAQ 2,141.12, +15.69 (0.74%)
S&P 500 1,066.19, +3.08 (0.29%)
NYSE Composite 6,782.75, -5.11 (0.08%)
As more evidence of the manipulative element in today's trading, consider that decliners beat advancers handily, 3476-3039. 149 new lows beat 96 new highs. Both of those indicators are contrary to the headline numbers. Volume was magnificent, owing both the the depth of selling and to the amount of financial heft necessary to keep the market from collapsing. But make no mistake about it. The decline will continue. The markets put in new lows which must be tested before any meaningful advance can occur. Chances are, today's lows will be surpassed to the downside within short order. Todays' reprieve was only necessary to avert a panic and to give insiders more opportunity to profit from the next leg down.
NYSE Volume 7,762,321,000
NASDAQ Volume 2,836,146,250
Oil closed at $71.19, down $2.98, at its lowest price since mid-December. Gold finished down $9.50, at $1,053.50 and silver finished down 47 cents, at $14.88. The commodities were only benefitted after their New York closes, not quite as fortunate as the equity markets.
Thursday, February 4, 2010
Deflation Storm Raging Globally
Thursday, February 4, 2010, may be a date to mark down as a pivotal one in the global economic cycle. As companies, consumers and nations struggle to rebound and refocus from the financial catastrophe of 2008 (actually the end result of decades of loose credit), more and more negative signs point to continued deterioration in capital, labor, commodity and equity markets.
What set the wheels in motion for a disastrous trading day in almost every global stock market, was the failed bond auction in tiny Portugal on Wednesday. The country failed to sell an expected 500 million Euros worth of one-year notes, as participation yielded the sale of only 300 million.
Early in the morning on Thursday, Moody's downgraded the outlook on the government of another tiny Eurozone nation, Lithuania, to negative, citing increased pressure due to a long-lingering recession and high debt-to-GDP ratio.
The two nations join Greece on the European list of sick economies, with no relief in sight. The global credit crunch continues to hamper the governments of smaller countries to borrow and spend. Fewer and fewer participants in government bond functions is like a loud bell clanging the death knell of debt-financed capitalist nations. Despite efforts by the US media to paper over our own failures in the bond market, news is gradually emerging, primarily from sources such as Robert Prechter of Elliott Wave and Jim Willie of Golden Jackass, that the entire US bond-debt function is a colossal sham, with government bonds being purchased by primary dealers and then repurchased by the Fed within a week's time.
The Chinese have virtually ceased participation in anything but the shortest-duration auctions, and other foreigners have followed suit. The Fed's policy of "quantitative easing" (printing money with no backing) was supposed to have ended in November, and, according to the Fed, it has stopped outright purchases of Treasuries, but the quiet, behind-the-scenes purchases of bonds from primary dealers - who cannot sell what they bought - works out to being exactly the same thing in practice.
All of these events are part of the positive feedback loop caused by the over-extension of credit without controls or proper risk analysis. What began in 2007 as the sub-prime mortgage crisis has extended to prime loans, commercial loans, junk bonds, corporate bonds, and finally all the way up the food chain to government bonds. Both Prechter and Willie predict that US Treasury bond defaults are bound to occur, though not until significant damage is done to other nations, particularly in Europe, already well underway.
What our "best and brightest" economists fail to either understand or are unwilling to admit, is that all of this nasty unwinding of credit and economy is the natural outcome of failed credit policies. Everyone, from college students all the way to the federal government, borrowed too much and now servicing the interest and principle payments are killing them. Residential and commercial real estate defaults are continuing to rise, another natural outcome of a bloated (by easy credit), overextended, mythical real estate boom. Today's global events are just another symptom of the same sickness, only to a greater degree.
Barely noticed amid the pre-market futures meltdown caused by another horrific reading of initial jobless claims - 480K - were the postponment of a pair of IPOs that were supposed to have priced overnight and sold into the market today. FriendFinder Networks (FFN) and Imperial Capital Group Inc (ICG) both were supposed to have gone off this week, but, due to weak market demand, neither went ahead with their offerings. Meanwhile, Ironwood Pharmaceuticals priced its offering of 16.7 million shares for $11.25 after its offering at $14 to $16 per share had met with considerable resistance. At the lowered price, Ironwood raised only 75% of their expected amount.
IPOs are having a truly difficult time coming to market. Investors are already highly risk-averse, and new issuance is seen as too risky. This is yet another deflationary signal as assets of all variety are put under microscopes and downgraded.
Then there's the firestorm surrounding Toyota. Problems keep propping up for the world's leading automaker. First, sticking gas pedals have forced a gigantic recall, and now, the brakes on their premium "green" maching, the Prius, are under scrutiny after having been the proximate cause for at least four US crashes. It's interesting speculation, but worth noting in an age of skulldruggery at the highest levels, that these problems should be happening to a foreign automaker just as American car companies find themselves in severe economic conditions. Most of the accidents are occurring in the US, where, incidentally, the parts, and, to some extent, the entire vehicles, were manufactured.
The next case is commodities. Oil, gold and silver are being hammered yet again, though this should come as no surprise. Oil consumption continues to be driven down by slack demand, in addition to artificial overpricing, and, while gold and silver are fine hedges against inflation, they can't escape the inevitable vortex of deflation. Like any other asset, they will be devalued, especially gold, which has been on a tear to the upside for the past decade. All those companies which were advertising "cash for gold" are going to end up just like buyers of overpriced homes in Southern California, upside-down and hopelessly in debt, though some may fare better than others as the metals are at least a somewhat reliable store of value, better than beanie babies, stocks or lawn furniture, though neither, in their raw investment form, have any functional purpose.
All of this sent investors scrambling on Thursday in advance of Friday morning's Non-farm payroll data. Anyone with half a brain is getting out of the way today, selling shares in anticipation of yet another disappointment.
Here's another mention of Great Depression II, only this time, it's in the mainstream.
I sold all my gold today before it went any lower. I received a good price, all cash, and now will watch as its price erodes. Cash is KING!
On Wall Street, they're beginning to run scared. All the talk this AM on CNBC (pays to watch it so you know what NOT to do) was about retail sales, and how the major chain stores reported better-than-expected results for January. But, let's ask, better than what? Last January, which stuck to high heaven? Exactly, and nobody bothered to mention that people who are shopping at Kohl's, Macy's et.al. are idiots with free money from unemployment, SS, disability, etc. The real carnage came from unemployment and the Sovereign Debt crisis mentioned at the beginning of this post.
Here's how stocks looked at the end of the day:
Dow 10,002.18, -268.37 (2.61%)
NASDAQ 2,125.43, -65.48 (2.99%)
S&P 500 1,063.11, -34.17 (3.11%)
NYSE Composite 6,787.86, -254.76 (3.62%)
Those are some pug-ugly numbers, and the volume was elevated, meaning the rush for the exits has begun. You, and your silly 401k or retirement plan, are trapped. Get ready for another colossal blow to your dreams and aspirations, because it's coming and this time it has been telegraphed loud and clear. Declining issues trampled all over the few gainers, 5566-828, a huge 7-1 ratio. And, as I've been saying would happen the past few weeks, the new highs-new lows indicators finally rolled over. There were 117 new lows and just 96 new highs. Folks, it's OVER.
NYSE Volume 6,857,842,500
NASDAQ Volume 2,819,441,000
The Dow finished at its lowest level since November 4, 2009, almost exactly 3 months. The S&P broke through key support levels at 1071 and 1065 and appears doomed for a return to 960 in short order. The NASDAQ didn't do any better, finishing just above its November 6 close.
Commodities were savaged as investors sold to raise cash. Oil lost $4.01, to $72.97. Gold fell $48.00, to $1064 per ounce. Silver shed 99 cents - an enormous 7% decline - to finish at $15.33.
What's truly frightening this time around is that this is only the beginning. All talk of the V-shaped recovery is now being laughed right out of town. Owning anything - stocks, bonds, homes, commercial real estate, art, gold, silver, barrels of oil, sports cards, you name it - may prove fatal to your financial health.
Here's a tip: If you're buying anything today, look at the price, offer 25% less, and you just may get it. One caveat, it still may not be a good deal six months from now. Be careful.
READ THE POST BELOW
What set the wheels in motion for a disastrous trading day in almost every global stock market, was the failed bond auction in tiny Portugal on Wednesday. The country failed to sell an expected 500 million Euros worth of one-year notes, as participation yielded the sale of only 300 million.
Early in the morning on Thursday, Moody's downgraded the outlook on the government of another tiny Eurozone nation, Lithuania, to negative, citing increased pressure due to a long-lingering recession and high debt-to-GDP ratio.
The two nations join Greece on the European list of sick economies, with no relief in sight. The global credit crunch continues to hamper the governments of smaller countries to borrow and spend. Fewer and fewer participants in government bond functions is like a loud bell clanging the death knell of debt-financed capitalist nations. Despite efforts by the US media to paper over our own failures in the bond market, news is gradually emerging, primarily from sources such as Robert Prechter of Elliott Wave and Jim Willie of Golden Jackass, that the entire US bond-debt function is a colossal sham, with government bonds being purchased by primary dealers and then repurchased by the Fed within a week's time.
The Chinese have virtually ceased participation in anything but the shortest-duration auctions, and other foreigners have followed suit. The Fed's policy of "quantitative easing" (printing money with no backing) was supposed to have ended in November, and, according to the Fed, it has stopped outright purchases of Treasuries, but the quiet, behind-the-scenes purchases of bonds from primary dealers - who cannot sell what they bought - works out to being exactly the same thing in practice.
All of these events are part of the positive feedback loop caused by the over-extension of credit without controls or proper risk analysis. What began in 2007 as the sub-prime mortgage crisis has extended to prime loans, commercial loans, junk bonds, corporate bonds, and finally all the way up the food chain to government bonds. Both Prechter and Willie predict that US Treasury bond defaults are bound to occur, though not until significant damage is done to other nations, particularly in Europe, already well underway.
What our "best and brightest" economists fail to either understand or are unwilling to admit, is that all of this nasty unwinding of credit and economy is the natural outcome of failed credit policies. Everyone, from college students all the way to the federal government, borrowed too much and now servicing the interest and principle payments are killing them. Residential and commercial real estate defaults are continuing to rise, another natural outcome of a bloated (by easy credit), overextended, mythical real estate boom. Today's global events are just another symptom of the same sickness, only to a greater degree.
Barely noticed amid the pre-market futures meltdown caused by another horrific reading of initial jobless claims - 480K - were the postponment of a pair of IPOs that were supposed to have priced overnight and sold into the market today. FriendFinder Networks (FFN) and Imperial Capital Group Inc (ICG) both were supposed to have gone off this week, but, due to weak market demand, neither went ahead with their offerings. Meanwhile, Ironwood Pharmaceuticals priced its offering of 16.7 million shares for $11.25 after its offering at $14 to $16 per share had met with considerable resistance. At the lowered price, Ironwood raised only 75% of their expected amount.
IPOs are having a truly difficult time coming to market. Investors are already highly risk-averse, and new issuance is seen as too risky. This is yet another deflationary signal as assets of all variety are put under microscopes and downgraded.
Then there's the firestorm surrounding Toyota. Problems keep propping up for the world's leading automaker. First, sticking gas pedals have forced a gigantic recall, and now, the brakes on their premium "green" maching, the Prius, are under scrutiny after having been the proximate cause for at least four US crashes. It's interesting speculation, but worth noting in an age of skulldruggery at the highest levels, that these problems should be happening to a foreign automaker just as American car companies find themselves in severe economic conditions. Most of the accidents are occurring in the US, where, incidentally, the parts, and, to some extent, the entire vehicles, were manufactured.
The next case is commodities. Oil, gold and silver are being hammered yet again, though this should come as no surprise. Oil consumption continues to be driven down by slack demand, in addition to artificial overpricing, and, while gold and silver are fine hedges against inflation, they can't escape the inevitable vortex of deflation. Like any other asset, they will be devalued, especially gold, which has been on a tear to the upside for the past decade. All those companies which were advertising "cash for gold" are going to end up just like buyers of overpriced homes in Southern California, upside-down and hopelessly in debt, though some may fare better than others as the metals are at least a somewhat reliable store of value, better than beanie babies, stocks or lawn furniture, though neither, in their raw investment form, have any functional purpose.
All of this sent investors scrambling on Thursday in advance of Friday morning's Non-farm payroll data. Anyone with half a brain is getting out of the way today, selling shares in anticipation of yet another disappointment.
Here's another mention of Great Depression II, only this time, it's in the mainstream.
I sold all my gold today before it went any lower. I received a good price, all cash, and now will watch as its price erodes. Cash is KING!
On Wall Street, they're beginning to run scared. All the talk this AM on CNBC (pays to watch it so you know what NOT to do) was about retail sales, and how the major chain stores reported better-than-expected results for January. But, let's ask, better than what? Last January, which stuck to high heaven? Exactly, and nobody bothered to mention that people who are shopping at Kohl's, Macy's et.al. are idiots with free money from unemployment, SS, disability, etc. The real carnage came from unemployment and the Sovereign Debt crisis mentioned at the beginning of this post.
Here's how stocks looked at the end of the day:
Dow 10,002.18, -268.37 (2.61%)
NASDAQ 2,125.43, -65.48 (2.99%)
S&P 500 1,063.11, -34.17 (3.11%)
NYSE Composite 6,787.86, -254.76 (3.62%)
Those are some pug-ugly numbers, and the volume was elevated, meaning the rush for the exits has begun. You, and your silly 401k or retirement plan, are trapped. Get ready for another colossal blow to your dreams and aspirations, because it's coming and this time it has been telegraphed loud and clear. Declining issues trampled all over the few gainers, 5566-828, a huge 7-1 ratio. And, as I've been saying would happen the past few weeks, the new highs-new lows indicators finally rolled over. There were 117 new lows and just 96 new highs. Folks, it's OVER.
NYSE Volume 6,857,842,500
NASDAQ Volume 2,819,441,000
The Dow finished at its lowest level since November 4, 2009, almost exactly 3 months. The S&P broke through key support levels at 1071 and 1065 and appears doomed for a return to 960 in short order. The NASDAQ didn't do any better, finishing just above its November 6 close.
Commodities were savaged as investors sold to raise cash. Oil lost $4.01, to $72.97. Gold fell $48.00, to $1064 per ounce. Silver shed 99 cents - an enormous 7% decline - to finish at $15.33.
What's truly frightening this time around is that this is only the beginning. All talk of the V-shaped recovery is now being laughed right out of town. Owning anything - stocks, bonds, homes, commercial real estate, art, gold, silver, barrels of oil, sports cards, you name it - may prove fatal to your financial health.
Here's a tip: If you're buying anything today, look at the price, offer 25% less, and you just may get it. One caveat, it still may not be a good deal six months from now. Be careful.
READ THE POST BELOW
Wednesday, February 3, 2010
Signs of Stupidity, Deflation and Depression
We've all heard about how Ben Bernanke, Tim Geithner and Hank Paulson saved the world from imminent financial collapse. Oddly enough, there was a Time Magazine cover story from 1999 about a similar trio of swashbuckling economists - Alan Greenspan, Robert Rubin and Lawrence Summers - who were then called the "Committee to Save the World."
Hmmm... 1999. Do we all remember what happened after this bunch - as Time loudly proclaimed on their cover - prevented a global economic meltdown?
What are we, stupid? I guess so. How is it that just 10 years ago we hailed the Fed Chairman and two Treasury Secretaries as "saviors" just before the whole country went kaput, and are doing the exact same thing again right now? Americans, and probably the majority of the world's population has the word "STUPID" printed on their foreheads in invisible ink which only economists can see through the aid of their special contact lenses and eyeglasses. Thus, their ability to hoodwink us into trusting them and then to hail them as heroes is entirely of our own making. We are their enablers.
So, don't blame them for the problems we face. Blame yourself. Did you take out too many loans? Did you overspend? Did you run up non-payable credit card debt? Did you not save a nickel during all those "boom" years, first in the 90s and more recently, from 2003-2008?
Go ahead and cry, it's OK. I did it too. But, there's a happy ending to this story. Well, maybe not exactly "happy," but maybe not tragic either. Now that we're all broke and penniless, or soon to be so, we're all in it together, down here scratching for scraps of food and any kind of work. An old adage suggests that "misery loves company," and in this instance, it could not ring more truly. With the accumulated debt of the nation approaching $13 trillion (not including $4 trillion from Fannie Mae and Freddie Mac, or about $59 trillion from unfunded Social Security, Medicare or federal retirement benefits - or is it $107 trillion?), millions of our countrymen and women out of work, foreclosures continuing to rise and a federal government bent on nationalizing everything from banks to car manufacturing to health care, bells and buzzers should be going off all over the place, yet we, yes, we dopes with STUPID surreptitiously stamped upon our foreheads, continue to work and spend and pay and worry and buy and pay, invest and lose, leaving our money in the same hands of the same greedy bankers who took us down this path to ruin.
We all deserve to be lined up and summarily executed, along with the congress and every member of the administration (people we voted into office). That would leave just little kids with no understanding of debt, the ultimate solution. I pray that my little tirade of sarcasm hasn't scared you into thinking it might just turn out that way. It might. It shouldn't, but to think that the people we call our heroes, but are actually a lying bunch of hoodlums, scoundrels and crooks, would be plotting the decimation of the world's finest democracy doesn't take much of a stretch of credulity.
There are things you and I can do before the situation gets much worse. I'll be discussing them in future posts as we wend our way through this sad, messy chapter of American history. But, just for starters, two things that won't work are: 1. leaving the country; 2. Staying put in a job you hate that doesn't pay you what you're worth.
The first doesn't work because other countries are in just as bad, if not worse, conditions than ours, and the second doesn't make any sense, right from Jump Street. Why anyone would want to waste their time on the planet toiling for people they don't like in a job they hate is beyond me. It sounds so masochistic. For a real solution, try watching the movie "Fight Club" until you either puke from disgust or actually come to an understanding of the deeper, hidden message in that film. Or, if you just need a good regurgitation, read Camus' "Nausea." I've heard it's even better in French.
As for the markets, the place people go when they wish to flush money away, stocks were generally weak and going nowhere. The daily movements of the stock market really don't stack up to a hill of fried chicken anymore, so thick is the distrust of counter-parties. Nobody really wants to be left holding the bag, and some estimates suggest that 40% of all trading is done by insiders, with insiders, and most of them work at Goldman Sachs. Funny, they say the same thing about betting on horses. 40% of all the action is carried out by owners, trainers, jockeys, grooms and even stewards. So, how are you supposed to win at that game? You're not. Get it?
Dow 10,270.55, -26.30 (0.26%)
NASDAQ 2,190.91, +0.85 (0.04%)
S&P 500 1,097.28, -6.04 (0.55%)
NYSE Composite 7,042.62, -58.82 (0.83%)
Losers beat gainers, 3910-2504. New highs beat new lows, 172-57, mostly due to the fact that at this time last year, stocks were falling faster than meteors from 13 miles above ground. Volume? Well, it absolutely sucked, just as it has for most of this miracle rally period since last March. With insiders trading mostly with insiders, what do you expect? There are fewer and fewer people willing to put money at risk every day. If you ave a 401k or other retirement plan, they're playing with your money, too. Isn't that a thought that makes you sleep well at night? If you're getting the idea that I'm just a little bit soured on the stock market and the general economy, you're beginning to get the message. However, unlike you, I'm fighting back. I've done some things to protect myself and eventually prosper from the obvious deflation that's been in place since the latter months of 2007.
NYSE Volume 4,917,465,000
NASDAQ Volume 2,341,595,500
Commodities were also weak. Oil, gold and silver were all lower. All the quotes I'm getting are different, depending on the source, so, for now, I'm not quoting specific prices, which is just what the market makers want: confusion. Haven't you ever wondered why currencies are so difficult to figure? The quotes most commonly used are Dollar:Yen, Euro:Dollar, Pound:Dollar. The Euro and Pound prices are inverted from the Yen, making comparisons and the real value of the dollar difficult, if not impossible, to decipher. It's a very confusing breakdown, but nobody cares to fix it? Why? Because it is confusing. Precisely.
According to Robert Prechter of the Elliott Wave, "a deflationary crash is characterized in part by a persistent, sustained, deep, general decline in people's desire and ability to lend and borrow. A depression is characterized in part by a persistent, sustained, deep general decline in production." (Conquer the Crash, Chapter 9)
Both of those conditions have been in place and at work since August, 2007. Efforts by the Fed, Treasury and the brilliant geniuses who troll Wall Street looking for suckers with money to forestall the inevitable have only lengthened the duration of the decline, then and now. Conditions seem to change with each month, quarter, economic or jobs report, but not much. Government statistics are so mangled that they no longer make sense or can be used as a true yardstick of economic vitality or disease.
We are in the throes of the worst depression the country has ever seen, kept afloat by federal payments to states, states to cites and so on, and by unemployment benefits, medicare transfers, retirement benefits, Social Security payments, and other seamless, unseen transfers of money like TARP, TALF, HAMP and other Federal Reserve machinations. Unemployment keeps rising, people keep losing their homes and most of us just go about their business as if things were normal.
Things are far from normal.
Hmmm... 1999. Do we all remember what happened after this bunch - as Time loudly proclaimed on their cover - prevented a global economic meltdown?
What are we, stupid? I guess so. How is it that just 10 years ago we hailed the Fed Chairman and two Treasury Secretaries as "saviors" just before the whole country went kaput, and are doing the exact same thing again right now? Americans, and probably the majority of the world's population has the word "STUPID" printed on their foreheads in invisible ink which only economists can see through the aid of their special contact lenses and eyeglasses. Thus, their ability to hoodwink us into trusting them and then to hail them as heroes is entirely of our own making. We are their enablers.
So, don't blame them for the problems we face. Blame yourself. Did you take out too many loans? Did you overspend? Did you run up non-payable credit card debt? Did you not save a nickel during all those "boom" years, first in the 90s and more recently, from 2003-2008?
Go ahead and cry, it's OK. I did it too. But, there's a happy ending to this story. Well, maybe not exactly "happy," but maybe not tragic either. Now that we're all broke and penniless, or soon to be so, we're all in it together, down here scratching for scraps of food and any kind of work. An old adage suggests that "misery loves company," and in this instance, it could not ring more truly. With the accumulated debt of the nation approaching $13 trillion (not including $4 trillion from Fannie Mae and Freddie Mac, or about $59 trillion from unfunded Social Security, Medicare or federal retirement benefits - or is it $107 trillion?), millions of our countrymen and women out of work, foreclosures continuing to rise and a federal government bent on nationalizing everything from banks to car manufacturing to health care, bells and buzzers should be going off all over the place, yet we, yes, we dopes with STUPID surreptitiously stamped upon our foreheads, continue to work and spend and pay and worry and buy and pay, invest and lose, leaving our money in the same hands of the same greedy bankers who took us down this path to ruin.
We all deserve to be lined up and summarily executed, along with the congress and every member of the administration (people we voted into office). That would leave just little kids with no understanding of debt, the ultimate solution. I pray that my little tirade of sarcasm hasn't scared you into thinking it might just turn out that way. It might. It shouldn't, but to think that the people we call our heroes, but are actually a lying bunch of hoodlums, scoundrels and crooks, would be plotting the decimation of the world's finest democracy doesn't take much of a stretch of credulity.
There are things you and I can do before the situation gets much worse. I'll be discussing them in future posts as we wend our way through this sad, messy chapter of American history. But, just for starters, two things that won't work are: 1. leaving the country; 2. Staying put in a job you hate that doesn't pay you what you're worth.
The first doesn't work because other countries are in just as bad, if not worse, conditions than ours, and the second doesn't make any sense, right from Jump Street. Why anyone would want to waste their time on the planet toiling for people they don't like in a job they hate is beyond me. It sounds so masochistic. For a real solution, try watching the movie "Fight Club" until you either puke from disgust or actually come to an understanding of the deeper, hidden message in that film. Or, if you just need a good regurgitation, read Camus' "Nausea." I've heard it's even better in French.
As for the markets, the place people go when they wish to flush money away, stocks were generally weak and going nowhere. The daily movements of the stock market really don't stack up to a hill of fried chicken anymore, so thick is the distrust of counter-parties. Nobody really wants to be left holding the bag, and some estimates suggest that 40% of all trading is done by insiders, with insiders, and most of them work at Goldman Sachs. Funny, they say the same thing about betting on horses. 40% of all the action is carried out by owners, trainers, jockeys, grooms and even stewards. So, how are you supposed to win at that game? You're not. Get it?
Dow 10,270.55, -26.30 (0.26%)
NASDAQ 2,190.91, +0.85 (0.04%)
S&P 500 1,097.28, -6.04 (0.55%)
NYSE Composite 7,042.62, -58.82 (0.83%)
Losers beat gainers, 3910-2504. New highs beat new lows, 172-57, mostly due to the fact that at this time last year, stocks were falling faster than meteors from 13 miles above ground. Volume? Well, it absolutely sucked, just as it has for most of this miracle rally period since last March. With insiders trading mostly with insiders, what do you expect? There are fewer and fewer people willing to put money at risk every day. If you ave a 401k or other retirement plan, they're playing with your money, too. Isn't that a thought that makes you sleep well at night? If you're getting the idea that I'm just a little bit soured on the stock market and the general economy, you're beginning to get the message. However, unlike you, I'm fighting back. I've done some things to protect myself and eventually prosper from the obvious deflation that's been in place since the latter months of 2007.
NYSE Volume 4,917,465,000
NASDAQ Volume 2,341,595,500
Commodities were also weak. Oil, gold and silver were all lower. All the quotes I'm getting are different, depending on the source, so, for now, I'm not quoting specific prices, which is just what the market makers want: confusion. Haven't you ever wondered why currencies are so difficult to figure? The quotes most commonly used are Dollar:Yen, Euro:Dollar, Pound:Dollar. The Euro and Pound prices are inverted from the Yen, making comparisons and the real value of the dollar difficult, if not impossible, to decipher. It's a very confusing breakdown, but nobody cares to fix it? Why? Because it is confusing. Precisely.
According to Robert Prechter of the Elliott Wave, "a deflationary crash is characterized in part by a persistent, sustained, deep, general decline in people's desire and ability to lend and borrow. A depression is characterized in part by a persistent, sustained, deep general decline in production." (Conquer the Crash, Chapter 9)
Both of those conditions have been in place and at work since August, 2007. Efforts by the Fed, Treasury and the brilliant geniuses who troll Wall Street looking for suckers with money to forestall the inevitable have only lengthened the duration of the decline, then and now. Conditions seem to change with each month, quarter, economic or jobs report, but not much. Government statistics are so mangled that they no longer make sense or can be used as a true yardstick of economic vitality or disease.
We are in the throes of the worst depression the country has ever seen, kept afloat by federal payments to states, states to cites and so on, and by unemployment benefits, medicare transfers, retirement benefits, Social Security payments, and other seamless, unseen transfers of money like TARP, TALF, HAMP and other Federal Reserve machinations. Unemployment keeps rising, people keep losing their homes and most of us just go about their business as if things were normal.
Things are far from normal.
Tuesday, February 2, 2010
Earnings Check-up Spurs Stocks Higher
A big surprise from homebuilder D.R. Horton (DHI) pushed stocks higher on Tuesday, as optimism spread that the US economy was truly on the rebound. The company said it earned $192 million, or 56 cents per share, in its fiscal first quarter, after analysts' called for a loss of $62.6 million, or 13 cents per share. The gigantic improvement, however, was mostly due to a tax gain of $149 million, making the true earnings picture much cloudier. Shares of D.H. Horton rose nearly 11% on the day.
Additionally, Emerson Electric (EMR) beat estimates, posting a profit, though a smaller one than last year at the same time.
Dow Chemical (DOW) may have had the most sobering and honest report of the day, though. The company earned $87 million, or 8 cents per share, compared to a loss of $1.55 billion, or $1.68 a share, in the year-ago period. While becoming profitable again, Chairman and Chief Executive Andrew Liveris warned that growth in the US and Europe may lag and that the overall global economy remains uneven.
Investors took all of this in stride and bought stocks like they were going out of style, which, to some degree, they actually are. There's more and more investor skittishness stemming from the financial meltdown of '08 and the missteps and inconsistent signals from both the administration and congress aren't helping matters much. A ton of money is still parked in money market funds or headed into less-mainstream investments.
Stocks are below their recent highs, though not down far enough to encourage the kind of wide-eyed participation seen today.
With the January non-farms payroll data due out on Friday, and ADP's private employment survey hitting the wires prior to Wednesday's open, the two-day rally may be more of a bounce than a lasting event. Unemployment remains stubbornly high and any disappointment in the upcoming employment data may skewer those who rushed in yesterday and today.
Besides the worries over unemployment, price rises in stocks are pushing p/e ratios close to nosebleed territory even though many companies have not increased revenues to the point at which they are planning to hire.
Dow 10,296.85, +111.32 (1.09%)
NASDAQ 2,190.06, +18.86 (0.87%)
S&P 500 1,103.32, +14.14 (1.30%)
NYSE Composite 7,101.44, +93.21 (1.33%)
Advancing issues outpaced decliners by a healthy margin for the second straight day, 4470-2051. There were 157 new highs, to just 57 new lows. Volume was very good, though not out of the recent range.
NYSE Volume 5,502,060,000
NASDAQ Volume 2,508,011,500
Commodities advanced, with crude oil leading the charge, up $1.77, to $77.23. Gold rose $13.20, to 1,118.20. Silver gained 8 cents to $16.74.
The major indices fell through their 50-day moving averages last week, so a snap-back rally like this is not unconventional. Notably, the 50-day moving average for the Dow Jones Industrials has reversed course, pointing lower for the first time since July of last year. It's going to take more than a few company earnings reports to restore confidence and resume last year's miracle rally.
A more probable outcome is that stocks languish further after earnings dissipate from investors' minds and the focus shifts more toward economic reports, the government and outside events. Growth in the economy has returned, but the stock market gains were so overdone in '09 that there's little upside from here.
Adding to the confusion are housing and unemployment, which remain the bogey men in the closet. Nobody is going to sleep well until foreclosure data begins to subside and employment begins to perk up. For now, it's mostly empty rhetoric and cheerleading from major firms and the entrenched financial reporters who toil on Wall Street.
Real estate markets across the country are still reeling, government budgets are broken, especially in municipalities of more than 100,000, and jobs simply are not being created by the biggest companies. The stimulus package passed by congress last year only staved off a depression. Another round of stimuli - focused on Main Street and small business - is essential to sustain any momentum that's been garnered.
As for stocks, they're generally 20-30% below their 2007 highs, and while many investors are hoping for a return to those levels, that outcome is highly in doubt because stock prices were wildly over-inflated at that juncture. The collapse of the market was more a predestined event than a surprise, so bullish arguments for continuation of the rally - which seems to have fallen apart - ring hollow.
Additionally, Emerson Electric (EMR) beat estimates, posting a profit, though a smaller one than last year at the same time.
Dow Chemical (DOW) may have had the most sobering and honest report of the day, though. The company earned $87 million, or 8 cents per share, compared to a loss of $1.55 billion, or $1.68 a share, in the year-ago period. While becoming profitable again, Chairman and Chief Executive Andrew Liveris warned that growth in the US and Europe may lag and that the overall global economy remains uneven.
Investors took all of this in stride and bought stocks like they were going out of style, which, to some degree, they actually are. There's more and more investor skittishness stemming from the financial meltdown of '08 and the missteps and inconsistent signals from both the administration and congress aren't helping matters much. A ton of money is still parked in money market funds or headed into less-mainstream investments.
Stocks are below their recent highs, though not down far enough to encourage the kind of wide-eyed participation seen today.
With the January non-farms payroll data due out on Friday, and ADP's private employment survey hitting the wires prior to Wednesday's open, the two-day rally may be more of a bounce than a lasting event. Unemployment remains stubbornly high and any disappointment in the upcoming employment data may skewer those who rushed in yesterday and today.
Besides the worries over unemployment, price rises in stocks are pushing p/e ratios close to nosebleed territory even though many companies have not increased revenues to the point at which they are planning to hire.
Dow 10,296.85, +111.32 (1.09%)
NASDAQ 2,190.06, +18.86 (0.87%)
S&P 500 1,103.32, +14.14 (1.30%)
NYSE Composite 7,101.44, +93.21 (1.33%)
Advancing issues outpaced decliners by a healthy margin for the second straight day, 4470-2051. There were 157 new highs, to just 57 new lows. Volume was very good, though not out of the recent range.
NYSE Volume 5,502,060,000
NASDAQ Volume 2,508,011,500
Commodities advanced, with crude oil leading the charge, up $1.77, to $77.23. Gold rose $13.20, to 1,118.20. Silver gained 8 cents to $16.74.
The major indices fell through their 50-day moving averages last week, so a snap-back rally like this is not unconventional. Notably, the 50-day moving average for the Dow Jones Industrials has reversed course, pointing lower for the first time since July of last year. It's going to take more than a few company earnings reports to restore confidence and resume last year's miracle rally.
A more probable outcome is that stocks languish further after earnings dissipate from investors' minds and the focus shifts more toward economic reports, the government and outside events. Growth in the economy has returned, but the stock market gains were so overdone in '09 that there's little upside from here.
Adding to the confusion are housing and unemployment, which remain the bogey men in the closet. Nobody is going to sleep well until foreclosure data begins to subside and employment begins to perk up. For now, it's mostly empty rhetoric and cheerleading from major firms and the entrenched financial reporters who toil on Wall Street.
Real estate markets across the country are still reeling, government budgets are broken, especially in municipalities of more than 100,000, and jobs simply are not being created by the biggest companies. The stimulus package passed by congress last year only staved off a depression. Another round of stimuli - focused on Main Street and small business - is essential to sustain any momentum that's been garnered.
As for stocks, they're generally 20-30% below their 2007 highs, and while many investors are hoping for a return to those levels, that outcome is highly in doubt because stock prices were wildly over-inflated at that juncture. The collapse of the market was more a predestined event than a surprise, so bullish arguments for continuation of the rally - which seems to have fallen apart - ring hollow.
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