Keeping one eye on the US economy and the other on US equity markets is something like watching two train wrecks in slow motion, wondering which will fall completely off the rails first. On any given day, stocks seem like the sure-fire winner, destined to send a signal to the broader economy. And when that occurs, ka-boom! Everything goes at once.
Today's stock action was actually quite silly and pointless. Down at the open, with a quick-strike rally up to the release of the Chicago PMI (down sharply from 62.3 in July 56.7 in August) and the Consumer Confidence Index from the Conference Board (up to 53.5 in August after a reading of 51.0 in July). Both bits of data were buoyed by the pre-market announcement of the Case-Shiller 20-city Index, which showed a quite remarkable improvement of 4.23% in June.
Release of the August FOMC minutes at 2:00 pm apparently rattled the market, sending all indices lower after maintaining gains through most of the session. Odd, because most of what was contained in the minutes has already been hashed out and priced into stocks. Nothing in the report shed any new light on Fed policy or the health of the economy (which everyone, even the Fed, knows is bad).
What's really interesting about the movement of the stock market is that it spent the first half hour and the final 1 1/2 hours of trading in negative territory. Ongoing is a rather stout defense of three positions: 10,000 on the Dow, 2100 on the NASDAQ, and the furtive 1040 on the S&P 500, but today's action, and, the overall market dynamics of the past three weeks, having a dearth of upside momentum indicate that those levels will likely not hold, are mere temporary hope points for the ignorant, almost sure to be taken out by Wednesday morning's ADP private employment report for August and further downside when August non-farm payroll data is released on Friday.
Some unsightly buying in the final few minutes of trading brought the Dow and S&P back from the dead, but was not enough to move the NASDAQ above the unchanged mark. Imagine your entire net worth and future pension all riding on the market-closing whims of Wall Street robber barons who are interested only in perception of the market rather than reality. That's precisely the position most American workers find themselves in today, never questioning the soundness of their investments or the trustworthiness of the marketplace.
It shouldn't surprise anyone, as American workers subjected themselves to slavery long ago, by acceptance of the income and payroll tax system. A man or woman is paid wages for his or her work. Taxing that output is nothing more than state-sponsored slavery, unconstitutional and immoral, but accepted nationwide. The tax burden on Americans is the single most detrimental factor to prosperity. Add up "contributions" in the forms of Social Security, Medicare, payroll tax, state income tax, sales tax, hidden excise tax (gas, cigarettes, etc.) and real property tax and the burden is over 50% of earned income for many Americans.
The US stock market, like the government, is neither fair nor impartial. Those who toil for taxable wages and invest in unfathomable securities are bound to meet their rightful destiny at some point. For some, the stock market collapse of 2008 was enough, and they have exited the system. For every one of those, however, are 100 to 500 more who toil in utter ignorance and fear. Despite countless examples to the contrary, they still believe that state and federal governments and Wall Street can be trusted for their well-being and general welfare. And on welfare is where many of them will eventually retire.
The month of August turned out to be a bummer for holders of paper wealth in equities. The S&P led the way with a 6.80% decline, followed by the NASDAQ, with a 6.24% drop, and finally, the Dow, which shed a mere 4.32%. Ah, that $100,000 earmarked for retirement shrank to around $95,000, depending on your investment preferences. Lovely.
Dow 10,014.72, +4.99 (0.05%)
NASDAQ 2,114.03, -5.94 (0.28%)
S&P 500 1,049.33, +0.41 (0.04%)
NYSE Composite 6,704.15, +8.87 (0.13%)
Advancing issues held sway over decliners by a narrow margin, 3337-3027. New highs edged new lows, 256-254. Volume was a little better than the normal moribund average of the past four weeks.
NASDAQ Volume 1,839,803,500
NYSE Volume 5,044,525,000
Commodities told a much different story than the "no change" stance taken by stocks. Crude oil for October delivery fell by nearly 4%, losing $2.78, to close at $71.92. Precious metals, on the other hand, were priced substantially higher, as faith in fiat-based money continued to erode. Gold gained $11.20, to $1,248.30, and silver, which has been a star of late, gained 36 cents, to $19.40.
The world is not coming to an abrupt end, though American society is undergoing a radical transformation, from a spendthrift, credit-driven society to one concerned more with bare essentials. We have more today than ever before, but most of it is either mortgaged, financed or overvalued and those who fail to amend their profligate ways shall be burdened with unpayable debts and a life of squalor.
Our national condition may take years to unwind, but there's no doubt that more pain awaits us all. If avoidance of unpleasantness is the key to happiness, Americans have been forewarned. Partisan rhetoric notwithstanding, we face more uncertainty and calamity right now than at any time in the past 60 years.
Tuesday, August 31, 2010
Monday, August 30, 2010
Awful August Continues; September Worst Month for Stocks
Since topping out at 10,698.75 on August 9, stocks have been in a pretty steady decline, losing almost 700 points on the Dow over the past 15 sessions. And what used to be known as "mutual fund Monday" - because so many fund investors would pony up with fresh cash - have been losers the past three weeks.
According to Reuters, today was the lowest combined volume for the three major exchanges: AMEX, NYSE and NASDAQ. In the absence of any kind of market-moving news, investors took the path of least resistance and shed shares in favor or more likely candidates. Bonds, gold and cash were where money was being parked until some certainty over the future of the US economy is ascertained.
The general mood being dour and weary, traders have found nothing upon which to hang a trade and that's a serious problem, not only for investors, but for the companies whose stocks trade on the public dollar. Without ample support, a slew of companies will simply cease to exist, especially when borrowing has become somewhat of a nuisance.
Sure, corporate debt is at high levels, but companies are finding it more palatable to borrow at low rates than touch the bales of cash they are hoarding, symptomatic of a deflationary depression, upon which the nation has embarked, without doubt.
Stocks never made it into positive territory, and declines worsened throughout the session. The usual thought of month-ending "window dressing" has been replaced by a flight to safety and out of risky assets.
Dow 10,009.73, -140.92 (1.39%)
NASDAQ 2,119.97, -33.66 (1.56%)
S&P 500 1,048.92, -15.67 (1.47%)
NYSE Composite 6,695.28, -99.63 (1.47%)
Declining issues buried advancers, 4931-1489, though new highs managed to beat out new lows, 240-125, only because so many stocks have been delisted of late.
NASDAQ Volume 1,614,811,125
NYSE Volume 3,411,060,000
Commodities were also weak. oil lost 47 cents, falling to $74.70. Gold managed a tiny gain of $1.50, to $1,237.10. Silver was unchanged at $19.04.
As bad as August has been, September is historically the worst month to own stocks.
Bank of America (BAC) fell 2.5 percent to $12.32, as fears that the Fed may begin dumping all of its toxic paper (originally owned by BofA and others) back upon the beleaguered institution. Somebody has to take the fall and there probably is no better candidate than BofA.
According to Reuters, today was the lowest combined volume for the three major exchanges: AMEX, NYSE and NASDAQ. In the absence of any kind of market-moving news, investors took the path of least resistance and shed shares in favor or more likely candidates. Bonds, gold and cash were where money was being parked until some certainty over the future of the US economy is ascertained.
The general mood being dour and weary, traders have found nothing upon which to hang a trade and that's a serious problem, not only for investors, but for the companies whose stocks trade on the public dollar. Without ample support, a slew of companies will simply cease to exist, especially when borrowing has become somewhat of a nuisance.
Sure, corporate debt is at high levels, but companies are finding it more palatable to borrow at low rates than touch the bales of cash they are hoarding, symptomatic of a deflationary depression, upon which the nation has embarked, without doubt.
Stocks never made it into positive territory, and declines worsened throughout the session. The usual thought of month-ending "window dressing" has been replaced by a flight to safety and out of risky assets.
Dow 10,009.73, -140.92 (1.39%)
NASDAQ 2,119.97, -33.66 (1.56%)
S&P 500 1,048.92, -15.67 (1.47%)
NYSE Composite 6,695.28, -99.63 (1.47%)
Declining issues buried advancers, 4931-1489, though new highs managed to beat out new lows, 240-125, only because so many stocks have been delisted of late.
NASDAQ Volume 1,614,811,125
NYSE Volume 3,411,060,000
Commodities were also weak. oil lost 47 cents, falling to $74.70. Gold managed a tiny gain of $1.50, to $1,237.10. Silver was unchanged at $19.04.
As bad as August has been, September is historically the worst month to own stocks.
Bank of America (BAC) fell 2.5 percent to $12.32, as fears that the Fed may begin dumping all of its toxic paper (originally owned by BofA and others) back upon the beleaguered institution. Somebody has to take the fall and there probably is no better candidate than BofA.
Friday, August 27, 2010
Did Bernanke Speech Spark a Rally?
Fed Chair Ben Bernanke delivered a keynote address to the attendees at Jackson Hole, Wyoming, the annual con-fab of economic and political elitists who have gathered to discuss and dissect the global economy.
Stocks were up in the first half hour of trading as the revision to second quarter GDP had come in a little better than some had expected, down to only 1.6% growth, lopping off nearly a full percentage point from the initial 2.4% figure. Immediately upon reaching the podium, however, Bernanke's mere presence sent stocks into a tailspin, right at 10:00 am, odd, in that no words had left the chairman's lips, though text of the speech had been widely distributed by then.
Were insiders shocked at what was contained in the speech? Probably not. The dramatic move to the downside was probably the work of a few well-timed large sellers working in concert, which they have been known to do. Within minutes, stocks began thrusting forward, sparking a sizable rally that lasted the length of the session.
As to whether the move was a response to what Ben Bernanke told the assemblage of high muckety-mucks in the wilderness will probably be the story of the day, though it probably had about as much to do with stock movement as whether Drew Barrymore and Justin Long will remain a couple (odds say they're split up by the third week in September).
No, today's outstanding rally in equities was once again nothing more than pure unbridled market manipulation by large firms seeking quick turnaround profits. One can note with ease the smashing decline and quick rebound off the morning's V-shaped bottom as a sign that adept traders sent indices hard lower, loaded up and then bought incrementally, stringing along the sheepish followers.
In a day to two the same shrewd buyers at the bottom will be sellers at or near the top. Once their round-trip trade has concluded, it will be back to the usual down-up-down pattern that has persisted for the better part of the year. Bernanke said little in his speech to assuage fears and nothing to tip the hand for future Federal Reserve policy decisions.
The entire text of the chairman's mind-numbingly boring riposte can be found here.
Dow 10,150.65, +164.84 (1.65%)
NASDAQ 2,153.63, +34.94 (1.65%)
S&P 500 1,064.59, +17.37 (1.66%)
NYSE Composite 6,794.91, +129.65 (1.95%)
The result of the Wall Street's one-day wonder was for advancers to eclipse declining issues by a wide margin, 4876-877 and new highs to vault past new lows, 247-156, once more. Again on the light side, volume spoke loudest.
NASDAQ Volume 2,169,648,250
NYSE Volume 4,295,823,500
This is absolutely the most rigorous of trader's markets, or, putting it more succinctly, Wall Street has completely devolved into a casino in which the house (represented by the major insider brokerages and trading firms) makes up rules on the fly, the dice are loaded, decks stacked and the roulette wheel is built on an adjustable ramp.
Small investors and those outside the loop are certain to become fodder for the big feeders.
While stocks were soaring the precious metals were left to linger. Gold gained only 60 cents, closing at $1,236.00, while silver added 6 cents, to $19.04. As one might expect, crude oil was the big winner, ramping up $1.81, to $75.17, its highest price of the week.
One makes choices in his or her life, of whether to believe in systems which have proven to be easily manipulated and difficult to comprehend, or to trust what one sees and hears and judge for oneself. Anybody believing today's rally was significant and a sign of better days ahead surely belongs in that former camp.
The rest of us still aren't buying into the "happy days" argument.
Stocks were up in the first half hour of trading as the revision to second quarter GDP had come in a little better than some had expected, down to only 1.6% growth, lopping off nearly a full percentage point from the initial 2.4% figure. Immediately upon reaching the podium, however, Bernanke's mere presence sent stocks into a tailspin, right at 10:00 am, odd, in that no words had left the chairman's lips, though text of the speech had been widely distributed by then.
Were insiders shocked at what was contained in the speech? Probably not. The dramatic move to the downside was probably the work of a few well-timed large sellers working in concert, which they have been known to do. Within minutes, stocks began thrusting forward, sparking a sizable rally that lasted the length of the session.
As to whether the move was a response to what Ben Bernanke told the assemblage of high muckety-mucks in the wilderness will probably be the story of the day, though it probably had about as much to do with stock movement as whether Drew Barrymore and Justin Long will remain a couple (odds say they're split up by the third week in September).
No, today's outstanding rally in equities was once again nothing more than pure unbridled market manipulation by large firms seeking quick turnaround profits. One can note with ease the smashing decline and quick rebound off the morning's V-shaped bottom as a sign that adept traders sent indices hard lower, loaded up and then bought incrementally, stringing along the sheepish followers.
In a day to two the same shrewd buyers at the bottom will be sellers at or near the top. Once their round-trip trade has concluded, it will be back to the usual down-up-down pattern that has persisted for the better part of the year. Bernanke said little in his speech to assuage fears and nothing to tip the hand for future Federal Reserve policy decisions.
The entire text of the chairman's mind-numbingly boring riposte can be found here.
Dow 10,150.65, +164.84 (1.65%)
NASDAQ 2,153.63, +34.94 (1.65%)
S&P 500 1,064.59, +17.37 (1.66%)
NYSE Composite 6,794.91, +129.65 (1.95%)
The result of the Wall Street's one-day wonder was for advancers to eclipse declining issues by a wide margin, 4876-877 and new highs to vault past new lows, 247-156, once more. Again on the light side, volume spoke loudest.
NASDAQ Volume 2,169,648,250
NYSE Volume 4,295,823,500
This is absolutely the most rigorous of trader's markets, or, putting it more succinctly, Wall Street has completely devolved into a casino in which the house (represented by the major insider brokerages and trading firms) makes up rules on the fly, the dice are loaded, decks stacked and the roulette wheel is built on an adjustable ramp.
Small investors and those outside the loop are certain to become fodder for the big feeders.
While stocks were soaring the precious metals were left to linger. Gold gained only 60 cents, closing at $1,236.00, while silver added 6 cents, to $19.04. As one might expect, crude oil was the big winner, ramping up $1.81, to $75.17, its highest price of the week.
One makes choices in his or her life, of whether to believe in systems which have proven to be easily manipulated and difficult to comprehend, or to trust what one sees and hears and judge for oneself. Anybody believing today's rally was significant and a sign of better days ahead surely belongs in that former camp.
The rest of us still aren't buying into the "happy days" argument.
Thursday, August 26, 2010
Relentless Bear Market Continues; Dow Closes Under 10,000
After taking a day off on some short-covering, stocks continued their relentless selloff on Thursday, sending the Dow careening to a close below 10,000 for the first time since July 6, nearly two months ago. While the 10,000 mark is not an important line of support nor resistance, it is still a valuable psychological level which many traders and even more casual observers will note with unease.
Stocks are trading within a fairly tight range, though the bottom of that range now begins to come into focus. On the Dow, the close of 9686 should be viewed as short-term support. A break through that level, which now seems highly likely within the upcoming days and weeks, would send an even stronger signal than the one that's currently flashing that the stock market and, by inference, the US economy, is failing on many levels.
Bad news continued to berate Wall Street, the latest being new unemployment claims - slightly better than last week's, coming in at 473,000 - and more distress on the home front, with the Mortgage Bankers Association reporting that "after declining since the beginning of 2009, the rate of short-term delinquencies is going up and the increase in these short-term delinquencies may ultimately drive the foreclosure measures back up."
The MBA said that the percentage of homes either already in foreclosure or behind by at least one payment on their mortgage was 13.97 in the second quarter of 2010, a number only marginally better than the 14.01% reported in the first quarter of 2010.
This steady stream of dour economic news had, until recently, been offset by fairly positive earnings reports from publicly-traded companies. Now that the season for corporate quarterly reporting has passed, there's nothing to buoy up stocks and investors - those not already out of the market - are increasingly trimming exposure and heading to either the sidelines, cash, bonds or precious metals. Thursday's beat-down marked the 10th day in the last 12 that the Dow has finished the day lower. From the start of the year, the Dow is down 443 points, or about 4% from where it ended 2009. The NASDAQ is off 150 points, or 6.6% for the year, while the S&P has suffered losses so far this year of 68 points. or 6.1%.
With prospects for the second half of the year not offering much in the way of hope, chances are good that 2010 will go down as another bad year to own stocks. Analysts cite a growing raft of concerns, including the Fed being unable to kick-start the economy; upcoming elections creating confusion; continued disappointing readings on unemployment and housing; banks not lending, consumers not wanting to borrow; the end of he Bush tax cuts; potential sovereign defaults in Greece, Ireland, Spain and Portugal; federal budget deficits and lower tax receipts; strained state and municipal budgets; and a host of other related and intertwining issues which are keeping the US economy in a straight jacket.
Naturally, everybody is seeking a way out, a solution, to put the economy back on a positive growth path, but few have examined the demographic and social implications of 30+ years of stimulation, easy credit and an upward trajectory in population. With baby boomers closing in on retirement and much of the population saving rather than spending, the traditional growth patterns since the second World War are unlikely to be replicated, so expectations should be ratcheted down instead of holding to the quaint - but incorrect - notion that the economy will return to "normalcy" once certain issues are worked out.
The entire stance of the federal government and the Federal Reserve has been one of keeping the credit spigot open and has wasted valuable resources and time fighting for a sustained growth pattern that probably will nor re-emerge for many years. Asset values, from stocks to houses, were artificially inflated for years, but now that trend is in reverse and nothing - even massive stimulus spending, 0% interest and backstopping the too-large-to-fail banks - is going to stop the economy from wringing out all of the malinvestment of the previous epoch.
Prices of homes and shares of almost all stocks will continue to fall until some balance is restored between wages and affordability. A little common sense from our brain-dead leaders in congress would certainly help, though it appears that the United States is plunging headlong into a depression that will rival or exceed the Great Depression of the 1930s. A combination of poor choices by consumers, investors, business leaders and the government has brought us to the brink of economic extinction. Over the coming two to three years, major business failures will occur, with a solid 10 to 20% of publicly-traded corporations filing some form of bankruptcy or reorganization. The financial firms, especially Bank of America, which fell today to another 52-week low, should be at the top of the list for bankruptcy court. The toxic assets which were the catalyst for the general decline and that they continue to keep off their books due to lax accounting standards are tied around their collected necks, albatrosses that will weigh them down and keep the economy from functioning in a reasonable manner.
There are going to be hard choices ahead for most Americans. It is time our leaders in government begin making some real decisions instead of playing politics and continuing to kick the can of economic distress further down the road. Solutions are needed now and these elected officials will not make them for fear of losing power. Their risk is that they will lose power no matter what, either through the voting booths or other, more draconian, traditional means.
Dow 9,985.81, -74.25 (0.74%)
NASDAQ 2,118.69, -22.85 (1.07%)
S&P 500 1,047.22, -8.11 (0.77%)
NYSE Composite 6,665.26, -30.86 (0.46%)
Declining issues beat down advancers, 3770-1946, though new highs moved back ahead of new lows, 210-129, though the numbers seem oddly skewed. Volume remained at the same distressed levels as the previous two sessions, with little improvement.
NASDAQ Volume 1,824,585,375
NYSE Volume 3,913,177,000
Oil gained 84 cents to close at $73.36. Gold traded down $4.10, to $1,235.40 and silver slipped 4 cents, to $18.98.
Friday offers the first revision to second quarter GDP, which is really beginning to appear like an imaginary number. The illuminati of the financial world already expects the figure to be revised from 2.4% to 1.3%, though the reality is that the way GDP is expressed today anything less than 2% growth should likely be considered a decline in real terms. The government shades the figures on almost every important statistic to make the economy appear to be better than it is. That also isn't helping matters.
Stocks are trading within a fairly tight range, though the bottom of that range now begins to come into focus. On the Dow, the close of 9686 should be viewed as short-term support. A break through that level, which now seems highly likely within the upcoming days and weeks, would send an even stronger signal than the one that's currently flashing that the stock market and, by inference, the US economy, is failing on many levels.
Bad news continued to berate Wall Street, the latest being new unemployment claims - slightly better than last week's, coming in at 473,000 - and more distress on the home front, with the Mortgage Bankers Association reporting that "after declining since the beginning of 2009, the rate of short-term delinquencies is going up and the increase in these short-term delinquencies may ultimately drive the foreclosure measures back up."
The MBA said that the percentage of homes either already in foreclosure or behind by at least one payment on their mortgage was 13.97 in the second quarter of 2010, a number only marginally better than the 14.01% reported in the first quarter of 2010.
This steady stream of dour economic news had, until recently, been offset by fairly positive earnings reports from publicly-traded companies. Now that the season for corporate quarterly reporting has passed, there's nothing to buoy up stocks and investors - those not already out of the market - are increasingly trimming exposure and heading to either the sidelines, cash, bonds or precious metals. Thursday's beat-down marked the 10th day in the last 12 that the Dow has finished the day lower. From the start of the year, the Dow is down 443 points, or about 4% from where it ended 2009. The NASDAQ is off 150 points, or 6.6% for the year, while the S&P has suffered losses so far this year of 68 points. or 6.1%.
With prospects for the second half of the year not offering much in the way of hope, chances are good that 2010 will go down as another bad year to own stocks. Analysts cite a growing raft of concerns, including the Fed being unable to kick-start the economy; upcoming elections creating confusion; continued disappointing readings on unemployment and housing; banks not lending, consumers not wanting to borrow; the end of he Bush tax cuts; potential sovereign defaults in Greece, Ireland, Spain and Portugal; federal budget deficits and lower tax receipts; strained state and municipal budgets; and a host of other related and intertwining issues which are keeping the US economy in a straight jacket.
Naturally, everybody is seeking a way out, a solution, to put the economy back on a positive growth path, but few have examined the demographic and social implications of 30+ years of stimulation, easy credit and an upward trajectory in population. With baby boomers closing in on retirement and much of the population saving rather than spending, the traditional growth patterns since the second World War are unlikely to be replicated, so expectations should be ratcheted down instead of holding to the quaint - but incorrect - notion that the economy will return to "normalcy" once certain issues are worked out.
The entire stance of the federal government and the Federal Reserve has been one of keeping the credit spigot open and has wasted valuable resources and time fighting for a sustained growth pattern that probably will nor re-emerge for many years. Asset values, from stocks to houses, were artificially inflated for years, but now that trend is in reverse and nothing - even massive stimulus spending, 0% interest and backstopping the too-large-to-fail banks - is going to stop the economy from wringing out all of the malinvestment of the previous epoch.
Prices of homes and shares of almost all stocks will continue to fall until some balance is restored between wages and affordability. A little common sense from our brain-dead leaders in congress would certainly help, though it appears that the United States is plunging headlong into a depression that will rival or exceed the Great Depression of the 1930s. A combination of poor choices by consumers, investors, business leaders and the government has brought us to the brink of economic extinction. Over the coming two to three years, major business failures will occur, with a solid 10 to 20% of publicly-traded corporations filing some form of bankruptcy or reorganization. The financial firms, especially Bank of America, which fell today to another 52-week low, should be at the top of the list for bankruptcy court. The toxic assets which were the catalyst for the general decline and that they continue to keep off their books due to lax accounting standards are tied around their collected necks, albatrosses that will weigh them down and keep the economy from functioning in a reasonable manner.
There are going to be hard choices ahead for most Americans. It is time our leaders in government begin making some real decisions instead of playing politics and continuing to kick the can of economic distress further down the road. Solutions are needed now and these elected officials will not make them for fear of losing power. Their risk is that they will lose power no matter what, either through the voting booths or other, more draconian, traditional means.
Dow 9,985.81, -74.25 (0.74%)
NASDAQ 2,118.69, -22.85 (1.07%)
S&P 500 1,047.22, -8.11 (0.77%)
NYSE Composite 6,665.26, -30.86 (0.46%)
Declining issues beat down advancers, 3770-1946, though new highs moved back ahead of new lows, 210-129, though the numbers seem oddly skewed. Volume remained at the same distressed levels as the previous two sessions, with little improvement.
NASDAQ Volume 1,824,585,375
NYSE Volume 3,913,177,000
Oil gained 84 cents to close at $73.36. Gold traded down $4.10, to $1,235.40 and silver slipped 4 cents, to $18.98.
Friday offers the first revision to second quarter GDP, which is really beginning to appear like an imaginary number. The illuminati of the financial world already expects the figure to be revised from 2.4% to 1.3%, though the reality is that the way GDP is expressed today anything less than 2% growth should likely be considered a decline in real terms. The government shades the figures on almost every important statistic to make the economy appear to be better than it is. That also isn't helping matters.
Wednesday, August 25, 2010
Markets End Losing Streak, but Are Up Only Slightly
Stocks started out in ugly fashion and got even uglier at 10:00 am when the Commerce Department announced that new home sales in July slipped to their lowest-ever level, selling at an annual rate of 276,000, down 12.4% from June and down 32.4% from July of last year. The number was the lowest ever recorded since the department began tabulating the data in the 1960s.
The media trotted out the usual commentary - just as it did trying to justify the horrific numbers in existing home sales - saying that the decline was tied to the April expiration of the government's $8,000 buyer home credit. The argument is weak, since the credit expired three months prior to the most recent recording period. May sales were awful, June's only slightly better, so the evidence seems to be pointing to widespread weakness in demand, like everything else in our stressed-out economic environment.
With prices falling as well, potential home buyers - the few that are out there - are either waiting for prices to drop further, which they most surely will, or waiting until there are some positive signs in the US economy. Either way, fewer and fewer people are diving into new or existing homes, and one can hardly blame them. Younger couples in particular may be concerned about their employment situation and don't feel an urgent need to take on massive new debt even though mortgage rates are at historic lows.
While the financial press continues to call the data "surprising," American households seem to have a better grip on what's really happening in the overall economy. At the best, it's stagnating, at the worst, we've never actually emerged from recession and are about to take another leg down.
The market's reaction to the report, along with a weak 0.3% reading on durable goods, was more salt into the wounds of already-battered bulls. The usual suspect experts were expecting durables to come in with an increase of 2.5-3.0%. As usual, they were sorely disappointed, especially since durable goods orders had fallen in the previous two months, and stripping out transportation, the numbers fell to -3.8%.
Some time around noon traders managed to piece together a soft rally which extended into the close, though there was little commitment among buyers. The gains looked more like dabbling in technology and heath care and consumer cyclical stocks, but didn't amount to much.
Dow 10,060.06, +19.61 (0.20%)
NASDAQ 2,141.54, +17.78 (0.84%)
S&P 500 1,055.33, +3.46 (0.33%)
NYSE Composite 6,696.12, +15.09 (0.23%)
Advancers galloped past declining issues, 3577-2177, though new lows exceeded new highs for the second consecutive session, 344-188. Volume was about the same as yesterday's, still in a very depressed state.
NASDAQ Volume 1,859,870,000
NYSE Volume 4,530,124,500
Oil traded lower on initial reports of US inventory builds, but managed to close the day higher, up 89 cents, to $72.52 a barrel. Gold continued its march toward new highs, gaining $7.70, to $1,239.50. Silver made its second strong advance in as many days, rocketing 65 cents to close the day at $19.02.
Today's smallish rally off nothing but bad news was probably more wishful thinking than rational investing by fund managers whose mandate requires stock purchases. It's a kind of forced buying which can turn markets around on individual days, even when the overall trend is very negative. The little bit of optimism provided probably won't last into the next session, with initial jobless claims due out at 8:30 am on Thursday. The much-anticipated revision to second quarter GDP caps off a week dominated by economic reports on Friday prior to the opening bell.
The media trotted out the usual commentary - just as it did trying to justify the horrific numbers in existing home sales - saying that the decline was tied to the April expiration of the government's $8,000 buyer home credit. The argument is weak, since the credit expired three months prior to the most recent recording period. May sales were awful, June's only slightly better, so the evidence seems to be pointing to widespread weakness in demand, like everything else in our stressed-out economic environment.
With prices falling as well, potential home buyers - the few that are out there - are either waiting for prices to drop further, which they most surely will, or waiting until there are some positive signs in the US economy. Either way, fewer and fewer people are diving into new or existing homes, and one can hardly blame them. Younger couples in particular may be concerned about their employment situation and don't feel an urgent need to take on massive new debt even though mortgage rates are at historic lows.
While the financial press continues to call the data "surprising," American households seem to have a better grip on what's really happening in the overall economy. At the best, it's stagnating, at the worst, we've never actually emerged from recession and are about to take another leg down.
The market's reaction to the report, along with a weak 0.3% reading on durable goods, was more salt into the wounds of already-battered bulls. The usual suspect experts were expecting durables to come in with an increase of 2.5-3.0%. As usual, they were sorely disappointed, especially since durable goods orders had fallen in the previous two months, and stripping out transportation, the numbers fell to -3.8%.
Some time around noon traders managed to piece together a soft rally which extended into the close, though there was little commitment among buyers. The gains looked more like dabbling in technology and heath care and consumer cyclical stocks, but didn't amount to much.
Dow 10,060.06, +19.61 (0.20%)
NASDAQ 2,141.54, +17.78 (0.84%)
S&P 500 1,055.33, +3.46 (0.33%)
NYSE Composite 6,696.12, +15.09 (0.23%)
Advancers galloped past declining issues, 3577-2177, though new lows exceeded new highs for the second consecutive session, 344-188. Volume was about the same as yesterday's, still in a very depressed state.
NASDAQ Volume 1,859,870,000
NYSE Volume 4,530,124,500
Oil traded lower on initial reports of US inventory builds, but managed to close the day higher, up 89 cents, to $72.52 a barrel. Gold continued its march toward new highs, gaining $7.70, to $1,239.50. Silver made its second strong advance in as many days, rocketing 65 cents to close the day at $19.02.
Today's smallish rally off nothing but bad news was probably more wishful thinking than rational investing by fund managers whose mandate requires stock purchases. It's a kind of forced buying which can turn markets around on individual days, even when the overall trend is very negative. The little bit of optimism provided probably won't last into the next session, with initial jobless claims due out at 8:30 am on Thursday. The much-anticipated revision to second quarter GDP caps off a week dominated by economic reports on Friday prior to the opening bell.
Tuesday, August 24, 2010
More Stumbling Along for Stocks as US Economy Slowly Crumbles
Anyone under the age of 60 as of this date (you'd have to be born on or after August 24, 1950) who believes that they'll be getting all of their promised Social Security benefits when they reach the age of 65... what's that? President Clinton and the Republican-led congress raised the retirement age to 67? Oh, that's right, I completely forgot that the government changes the rules as they go along...
So, where was I? Right. If you are under the age of 60 and actually believe that Social Security (already paying out more than it takes in) will pay you, beginning at age 67, what they say you're actually due, you need a reality check, not a government check. The federal government is technically insolvent, has been for years and the situation continues to worsen every day politicians dance around the issues of unfunded liabilities such as Social Security and Medicare. The future obligations of those two entitlements alone amount to something in the range of $53 to $85 trillion, completely dwarfing the more-readily recognized national debt, which itself is an abomination at over $12 trillion.
These debts and obligations are a large part of the problem causing individuals, businesses and investors to stop cold in their tracks when attempting to make buying decisions. The overburden of these debts, brought about by a congress - and a public that allowed it - which binged on debt and the former surpluses in the programs (at least in the case of Social Security) are just one issue facing the US economy. There are many others, but these are the big ones, and they will absolutely kill the US economy, the only question being when.
I don't purport to have an answer to that, though it would be prudent to not rely on any future income promised by the US government, and to a lesser degree, any state or municipality simply because the money just isn't there. Baby Boomers are heading directly into the Social Security pool and the burden on current earners will be unbearable unless remedies are found, and soon.
Unfortunately, nobody in Washington is willing to touch the issue until, at the very earliest, January of next year, when a new congress will be installed. Don't count on any meaningful reforms any time soon, however, as the candidates for federal offices - congressmen and senators - are not even as well-qualified as the ones currently holding office, and this bunch isn't very good at anything.
So, America continues to stumble through the worst recession since the 1930s a ship without a rudder, or a sail. We are just drifting along, nobody knowing exactly which direction we're going, when we'll arrive or what awaits us when we get there.
Consensus opinion is leaning toward believing that wherever we're going, the destination will be a bleak and desolate place, especially when we get economic data like that released by the NAR today, showing existing home sales falling to their lowest levels since the National Association of Realtors began tracking the numbers in 1999.
This kind of bleak economic picture is not welcome to investors of any stripe. People are scared, bordering on desperation from a housing and employment collapse which are symptoms of even bigger ills, debt and dwindling resources.
Dow 10,040.45, -133.96 (1.32%)
NASDAQ 2,123.76, -35.87 (1.66%)
S&P 500 1,051.87, -15.49 (1.45%)
NYSE Composite 6,681.03, -103.94 (1.53%)
Declining issues finished the session well ahead of advancers, 4439-1402. New lows shot past new highs, 416-190, marking a complete turnover in that indicator. Volume was a bit higher than previous slow sessions, though, on a down day, that has to be viewed as a negative.
NASDAQ Volume 1,885,569,250
NYSE Volume 4,631,528,500
Oil continued its relentless slide, which, during the month of August, is alarming. Crude usually improves price-wise during the summer, though this year has remained largely range-bound. Crude fell another $1.47, to $71.63 on the day.
Precious metals were the only safe haven. Gold gained 4.80, to $1,231.80, while silver ramped ahead by more than 2%, up 39 cents, to $18.37.
The litany of sour economic news continues apace, and though it would be welcome for a bit of good news on the economy, none seems forthcoming. The US and global economies are stumbling badly with no apparent end in sight.
So, where was I? Right. If you are under the age of 60 and actually believe that Social Security (already paying out more than it takes in) will pay you, beginning at age 67, what they say you're actually due, you need a reality check, not a government check. The federal government is technically insolvent, has been for years and the situation continues to worsen every day politicians dance around the issues of unfunded liabilities such as Social Security and Medicare. The future obligations of those two entitlements alone amount to something in the range of $53 to $85 trillion, completely dwarfing the more-readily recognized national debt, which itself is an abomination at over $12 trillion.
These debts and obligations are a large part of the problem causing individuals, businesses and investors to stop cold in their tracks when attempting to make buying decisions. The overburden of these debts, brought about by a congress - and a public that allowed it - which binged on debt and the former surpluses in the programs (at least in the case of Social Security) are just one issue facing the US economy. There are many others, but these are the big ones, and they will absolutely kill the US economy, the only question being when.
I don't purport to have an answer to that, though it would be prudent to not rely on any future income promised by the US government, and to a lesser degree, any state or municipality simply because the money just isn't there. Baby Boomers are heading directly into the Social Security pool and the burden on current earners will be unbearable unless remedies are found, and soon.
Unfortunately, nobody in Washington is willing to touch the issue until, at the very earliest, January of next year, when a new congress will be installed. Don't count on any meaningful reforms any time soon, however, as the candidates for federal offices - congressmen and senators - are not even as well-qualified as the ones currently holding office, and this bunch isn't very good at anything.
So, America continues to stumble through the worst recession since the 1930s a ship without a rudder, or a sail. We are just drifting along, nobody knowing exactly which direction we're going, when we'll arrive or what awaits us when we get there.
Consensus opinion is leaning toward believing that wherever we're going, the destination will be a bleak and desolate place, especially when we get economic data like that released by the NAR today, showing existing home sales falling to their lowest levels since the National Association of Realtors began tracking the numbers in 1999.
This kind of bleak economic picture is not welcome to investors of any stripe. People are scared, bordering on desperation from a housing and employment collapse which are symptoms of even bigger ills, debt and dwindling resources.
Dow 10,040.45, -133.96 (1.32%)
NASDAQ 2,123.76, -35.87 (1.66%)
S&P 500 1,051.87, -15.49 (1.45%)
NYSE Composite 6,681.03, -103.94 (1.53%)
Declining issues finished the session well ahead of advancers, 4439-1402. New lows shot past new highs, 416-190, marking a complete turnover in that indicator. Volume was a bit higher than previous slow sessions, though, on a down day, that has to be viewed as a negative.
NASDAQ Volume 1,885,569,250
NYSE Volume 4,631,528,500
Oil continued its relentless slide, which, during the month of August, is alarming. Crude usually improves price-wise during the summer, though this year has remained largely range-bound. Crude fell another $1.47, to $71.63 on the day.
Precious metals were the only safe haven. Gold gained 4.80, to $1,231.80, while silver ramped ahead by more than 2%, up 39 cents, to $18.37.
The litany of sour economic news continues apace, and though it would be welcome for a bit of good news on the economy, none seems forthcoming. The US and global economies are stumbling badly with no apparent end in sight.
Monday, August 23, 2010
24 Seconds to Financial Incineration
Another Monday of not trading (for many) has come and gone, and with it the hopes for a US economic recovery any time soon. Even though the words - like upturn, rebound, recovery - are spoken on CNBC, evidence of them is falling in frequency as the evaporation of trading continues to take hold.
There's a real problem with the US markets and it has as much to do with technology and greed as it does with fear, uncertainty and skepticism, all of which have been on the rise not just in the past few weeks or months, but for years.
The average American (if there is anything such as "average") is invested, like it or not, in stocks to varying degrees. Some have their own online accounts, some are in mutual funds, others in 401k funds, others have their money forcibly taken from them by union fiat and pushed into a pension fund. Anyone who pays taxes is invested via society because the money they pay in taxes is inextricably wound up into public employee pension funds, most of which are glorified Ponzi schemes which need to be radially overhauled. So, for the sake of argument, we all have an interest in the smooth functioning and prosperity of our capital markets.
What amounts to the real problem, at its very core, is a rising lack of confidence that the system is fair and not manipulated. And that's because many have come to the sad realization that it is not, that it favors those with bigger bank accounts, better access and faster computers. Nothing could have put that issue more in focus than the "flash crash" of May 6, 2010, when stocks tumbled more than 600 points on the Dow Jones Industrial Index in a matter of minutes before recovering most of those losses in mere minutes afterward.
Why the "flash crash" of concern right now carries any number of rationales, but it is probably the one event - still unexplained by government regulators who vowed to "look into" the matter - that has, more than any other single event, exacerbated the flight of small investors away from stocks and stock markets.
Foremost, the regulators looking into the cause of the event are lying through their collective teeth when they say they have not figured out why it occurred. It happened because of a time lag in different trade reporting venues, between the NYSE, the specialists and other exchanges and exploitation of them by hedge fund traders. Which exchanges or traders are not readily known, though the SEC could pin those down if they so desired.
More than likely culprits include high-frequency traders (HFT) whose desks belong to some of the more well-known institutions on Wall Street, which is another reason why the government can't seem to find numerous needles in the stock market haystack. The clues are all there, all recorded, but the regulators simply do not want to expose the truth, their reasons being that even more faith in the markets would be squandered, while, in reality, their resolute desire to "keep the lid on" is only making matters worse as more and more honest investors are too afraid, been burned too many times and now have lost their last remaining sliver of faith in the markets.
An interesting article by Tyler Durden of ZeroHedge.com, published today, adds more credence to the machinations of the conspiracy crowd. Durden cites a report which demonstrates two very salient pieces of data. One is that the NBBO (National Best Bid and Offer) - the best price quoted - is not actually that at all, that it often defaults to the NYSE price. The second piece of information is even more critical: the time lag between the quoted NYSE price and the actual trading price can be as much as 24 seconds or longer in the CQS (Consolidated Quotation System).
This may sound like a lot of mumbo-jumbo to most people, but in a world dominated by enormous companies using vast amounts of money and the world's fastest computers, 24 seconds in which a quote may be off by a quarter point, a half point or more, can result in huge profits, and that's what happened during the aforementioned "flash crash" and continues as an illegal arbitrage tool of the rich and powerful to this day.
Rather than belabor the point by trying to explain it all in layman's terms, attention should be focused on Nanex.net the one company which has done a detailed analysis of the event and continues to provide cogent explanations of what's really going on behind the scenes in our swift and untidy, unbalanced, unfair markets.
The question arises that if Nanex could figure this out, why hasn't the SEC? And why hasn't this been headline news on the financial and news networks? Being that I am prone to believing the worst about corporations and our government, I urge readers to examine the facts and draw their own conclusions. I believe the work by Nanex is top-rate and unbiased, and I'll leave it at that.
All of this matters so much today because the markets are rather rapidly grinding to a halt. We've been detailing the low volume regime that's persisted for the past two weeks, and today it got even worse. Not only that, but the trading pattern of the major indices are indicating massive manipulation and arrogance by insiders and patterns suggestive of an imminent crash.
I've borrowed the chart of today's Dow for emphasis.
Note that stocks were up initially, and then fell abruptly, vacillated through most of the day and then slid lower into the close. The other indices followed roughly the same pattern all day. This is a classic bear market trading session, a sucker's market, if you will, in which stocks fly at the open suckering in the slower traders, pounded lower throughout the day, and then hammered down again into the close. As usual, some people made money off this trade, others lost. You can only guess who were the winners (HTFs, Goldman Sachs, JP Morgan, et. al.) and who were the losers (individual investors, some small hedge funds, pension and mutual funds).
This is a no-win situation for everybody as pointed out by Kristina Peterson in "Not Wolf, Not Bear, Meet the Wolf Market," published in the Wall Street Journal, which describes the current condition of the market as analogous to a pack of wolves, which, after devouring all of the prey then turn on each other. Ergo, low volume of trading, because, in the wolf market, there aren't many other animals on which to gnaw.
So, thanks for indulging me, and allowing me to explain how 24 seconds can turn into the equivalent of an eternity in financial hell.
Dow 10,174.41, -39.21 (0.38%)
NASDAQ 2,159.63, -20.13 (0.92%)
S&P 500 1,067.36, -4.33 (0.40%)
NYSE Composite 6,784.97, -28.18 (0.41%)
On the day, decliners took advantage over advancing issues, 3902-1826, though new highs exceeded new lows, 263-216.
NASDAQ Volume 1,722,462,250
NYSE Volume 3,477,778,250
Commodities continued to trend lower, especially in the energy space, where crude oil for September delivery slipped another 72 cents, to $73.10. The metals were little changed. Gold fell 40 cents, to $1,226.90, and silver was unchanged at $17.98.
Things are grinding to a halt almost everywhere, but we'll find out just how quickly with some economic data this week. Existing home sales figures for July will be released tomorrow, new home sales and durable goods on Wednesday, initial claims on Thursday and finally, the government's second estimate on GDP for the second quarter on Friday, along with the University of Michigan's Consumer Sentiment Index. It ought to be a fascinating, though slow-trading volume week.
There's a real problem with the US markets and it has as much to do with technology and greed as it does with fear, uncertainty and skepticism, all of which have been on the rise not just in the past few weeks or months, but for years.
The average American (if there is anything such as "average") is invested, like it or not, in stocks to varying degrees. Some have their own online accounts, some are in mutual funds, others in 401k funds, others have their money forcibly taken from them by union fiat and pushed into a pension fund. Anyone who pays taxes is invested via society because the money they pay in taxes is inextricably wound up into public employee pension funds, most of which are glorified Ponzi schemes which need to be radially overhauled. So, for the sake of argument, we all have an interest in the smooth functioning and prosperity of our capital markets.
What amounts to the real problem, at its very core, is a rising lack of confidence that the system is fair and not manipulated. And that's because many have come to the sad realization that it is not, that it favors those with bigger bank accounts, better access and faster computers. Nothing could have put that issue more in focus than the "flash crash" of May 6, 2010, when stocks tumbled more than 600 points on the Dow Jones Industrial Index in a matter of minutes before recovering most of those losses in mere minutes afterward.
Why the "flash crash" of concern right now carries any number of rationales, but it is probably the one event - still unexplained by government regulators who vowed to "look into" the matter - that has, more than any other single event, exacerbated the flight of small investors away from stocks and stock markets.
Foremost, the regulators looking into the cause of the event are lying through their collective teeth when they say they have not figured out why it occurred. It happened because of a time lag in different trade reporting venues, between the NYSE, the specialists and other exchanges and exploitation of them by hedge fund traders. Which exchanges or traders are not readily known, though the SEC could pin those down if they so desired.
More than likely culprits include high-frequency traders (HFT) whose desks belong to some of the more well-known institutions on Wall Street, which is another reason why the government can't seem to find numerous needles in the stock market haystack. The clues are all there, all recorded, but the regulators simply do not want to expose the truth, their reasons being that even more faith in the markets would be squandered, while, in reality, their resolute desire to "keep the lid on" is only making matters worse as more and more honest investors are too afraid, been burned too many times and now have lost their last remaining sliver of faith in the markets.
An interesting article by Tyler Durden of ZeroHedge.com, published today, adds more credence to the machinations of the conspiracy crowd. Durden cites a report which demonstrates two very salient pieces of data. One is that the NBBO (National Best Bid and Offer) - the best price quoted - is not actually that at all, that it often defaults to the NYSE price. The second piece of information is even more critical: the time lag between the quoted NYSE price and the actual trading price can be as much as 24 seconds or longer in the CQS (Consolidated Quotation System).
This may sound like a lot of mumbo-jumbo to most people, but in a world dominated by enormous companies using vast amounts of money and the world's fastest computers, 24 seconds in which a quote may be off by a quarter point, a half point or more, can result in huge profits, and that's what happened during the aforementioned "flash crash" and continues as an illegal arbitrage tool of the rich and powerful to this day.
Rather than belabor the point by trying to explain it all in layman's terms, attention should be focused on Nanex.net the one company which has done a detailed analysis of the event and continues to provide cogent explanations of what's really going on behind the scenes in our swift and untidy, unbalanced, unfair markets.
The question arises that if Nanex could figure this out, why hasn't the SEC? And why hasn't this been headline news on the financial and news networks? Being that I am prone to believing the worst about corporations and our government, I urge readers to examine the facts and draw their own conclusions. I believe the work by Nanex is top-rate and unbiased, and I'll leave it at that.
All of this matters so much today because the markets are rather rapidly grinding to a halt. We've been detailing the low volume regime that's persisted for the past two weeks, and today it got even worse. Not only that, but the trading pattern of the major indices are indicating massive manipulation and arrogance by insiders and patterns suggestive of an imminent crash.
I've borrowed the chart of today's Dow for emphasis.Note that stocks were up initially, and then fell abruptly, vacillated through most of the day and then slid lower into the close. The other indices followed roughly the same pattern all day. This is a classic bear market trading session, a sucker's market, if you will, in which stocks fly at the open suckering in the slower traders, pounded lower throughout the day, and then hammered down again into the close. As usual, some people made money off this trade, others lost. You can only guess who were the winners (HTFs, Goldman Sachs, JP Morgan, et. al.) and who were the losers (individual investors, some small hedge funds, pension and mutual funds).
This is a no-win situation for everybody as pointed out by Kristina Peterson in "Not Wolf, Not Bear, Meet the Wolf Market," published in the Wall Street Journal, which describes the current condition of the market as analogous to a pack of wolves, which, after devouring all of the prey then turn on each other. Ergo, low volume of trading, because, in the wolf market, there aren't many other animals on which to gnaw.
So, thanks for indulging me, and allowing me to explain how 24 seconds can turn into the equivalent of an eternity in financial hell.
Dow 10,174.41, -39.21 (0.38%)
NASDAQ 2,159.63, -20.13 (0.92%)
S&P 500 1,067.36, -4.33 (0.40%)
NYSE Composite 6,784.97, -28.18 (0.41%)
On the day, decliners took advantage over advancing issues, 3902-1826, though new highs exceeded new lows, 263-216.
NASDAQ Volume 1,722,462,250
NYSE Volume 3,477,778,250
Commodities continued to trend lower, especially in the energy space, where crude oil for September delivery slipped another 72 cents, to $73.10. The metals were little changed. Gold fell 40 cents, to $1,226.90, and silver was unchanged at $17.98.
Things are grinding to a halt almost everywhere, but we'll find out just how quickly with some economic data this week. Existing home sales figures for July will be released tomorrow, new home sales and durable goods on Wednesday, initial claims on Thursday and finally, the government's second estimate on GDP for the second quarter on Friday, along with the University of Michigan's Consumer Sentiment Index. It ought to be a fascinating, though slow-trading volume week.
Friday, August 20, 2010
Stocks Finish with Wide Losses as Financial Continue Decline
For the third week in the past four, the major indices recored losses, which is especially poignant this week as the expiration of stock options usually encourages some upward momentum, but there was little to be found as another drab session marked the close of the week.
Stocks bottomed out just at the noon hour before rallying back somewhat, with fresh cash being put to use in what some must surely consider "bargains." There was some discussion on the internet Thursday about buying into Bank of America as the stock hit fresh 52-week lows, but broke down again on Friday to even lower levels.
Consistently the second most traded stock on the NYSE, Bank of America crumpled to a close of 12.87, marking a 34% decline from its closing high of 19.47 on April 15. In the span of four months, one of the most heavily traded stocks in the world has lost more than one third of its market cap. Something is definitely not right, and investors are voting with their feet, running away from the zombie bank as fast as they can.
What is wrong with Bank of America is also wrong with Citigroup (C), JP Mogan Chase (JPM) and Wells Fargo (WFC) to varying degrees. They are all victims of their own fortunes, made during the bubbly sub-prime housing boom days from 2003-2007 and crushed by the onslaught of those loans - and many more - going sour. These four banks share a raft of common themes, in that they all made fabulous amounts of money during the housing boom, executives were enriched grandly, all were TARP fund recipients and all were aided in the Spring of 2009 when the FASB allowed banks to employ significant judgement in "mark to market" accounting.
The rule allowed the banks enormous leeway in how they valued assets while at the same time reducing writedowns on impaired investments, including mortgage-backed securities. The rule change saved the banks from untold billions of dollars in impairment charges, but the same rule, as long as it remains in force, keeps bank capital bottled up and unable to be lent.
Honest accounting would probably put the nation's largest banks into receivership or bankruptcy and unleash a financial tsunami that would make the 2008 crash look like a gentle summer rain. In the meantime, many investors are apparently not about to wait for BofA and its counterparts to work out all of their bad, toxic and otherwise broken down investments. They are leaving the stock in droves.
BofA's brethren are in similar straits, taking on losses since mid-April of between 25-35%. Wells Fargo has dropped from 34.25 to as low as 24.27. JP Morgan Chase has gone from a high of 48.20 to as low as 35.16. And Citigroup, usually the most actively-traded stock on the NYSE, has dipped from 5 in mid-April to 3.75 today, a neat, 25% haircut.
While Wall Street pounds the table over Washington's inaction on the fiscal front, lawmakers in Washington are eerily quiet about the fate of the nation's largest banks, seeming to want the nightmare scenario of another Japan-style deflation to just go away. The truth is that they have no clue what to do next, relying on the Federal Reserve to sop up excesses in the default markets and keep interest rates at ZERO until something good happens, whatever that might be. Washington politicians are only interested in keeping their jobs, meaning that they will purposely mislead the public into a false sense of stability until the elections this November.
In the meantime, the nation suffers and America's fiscal problems become worse by the day as the corrective measures that would have already kicked these banks to the collective curbs have not been even mentioned. Bad assets need to be written down and the companies need to take their licks, but that solution is seen as messy and untenable by the ruling elite.
The entire situation reeks of insider deals, secrecy, mismanagement and falsehood, and it is killing the US economy, little by little, day in and day out.
Dow 10,213.62, -57.59 (0.56%)
NASDAQ 2,179.76, +0.81 (0.04%)
S&P 500 1,071.69, -3.94 (0.37%)
NYSE Composite 6,813.15, -37.30 (0.54%)
On the day, there were more losers than winners, by a 3567-2778 tally. Tellingly, new lows surpassed new highs, 259-226, signaling that those who were buying all afternoon were either delusional or just misguided. The markets appear ready to break down once again to fresh lows. Dipping below the 9680 mark on the Dow over the next month is certainly in the equation. Volume was a little better than most of this week, though that's another negative. Higher volume on losing days indicates, quite simply, that more stocks are being sold than bought.
NASDAQ Volume 1,913,865,250.00
NYSE Volume 4,309,225,000
Stocks were not the only asset class being beaten down. Crude oil for September delivery fell another 97 cents, to $73.46 on the NYMEX. Gold lost $6.60, to $1,227.20, and silver was hammered down nearly 2%, losing 37 cents to close the week at $17.98 the ounce.
Deflation has come, and has actually been pushing on stocks, bond yields and home prices for the past three years. Only the federal government's ability to throw large amounts of money around has kept the economy from complete collapse, though the band-aid approach seems to have failed miserably and the eventual downturn will be more severe than anyone can imagine.
Stocks bottomed out just at the noon hour before rallying back somewhat, with fresh cash being put to use in what some must surely consider "bargains." There was some discussion on the internet Thursday about buying into Bank of America as the stock hit fresh 52-week lows, but broke down again on Friday to even lower levels.
Consistently the second most traded stock on the NYSE, Bank of America crumpled to a close of 12.87, marking a 34% decline from its closing high of 19.47 on April 15. In the span of four months, one of the most heavily traded stocks in the world has lost more than one third of its market cap. Something is definitely not right, and investors are voting with their feet, running away from the zombie bank as fast as they can.
What is wrong with Bank of America is also wrong with Citigroup (C), JP Mogan Chase (JPM) and Wells Fargo (WFC) to varying degrees. They are all victims of their own fortunes, made during the bubbly sub-prime housing boom days from 2003-2007 and crushed by the onslaught of those loans - and many more - going sour. These four banks share a raft of common themes, in that they all made fabulous amounts of money during the housing boom, executives were enriched grandly, all were TARP fund recipients and all were aided in the Spring of 2009 when the FASB allowed banks to employ significant judgement in "mark to market" accounting.
The rule allowed the banks enormous leeway in how they valued assets while at the same time reducing writedowns on impaired investments, including mortgage-backed securities. The rule change saved the banks from untold billions of dollars in impairment charges, but the same rule, as long as it remains in force, keeps bank capital bottled up and unable to be lent.
Honest accounting would probably put the nation's largest banks into receivership or bankruptcy and unleash a financial tsunami that would make the 2008 crash look like a gentle summer rain. In the meantime, many investors are apparently not about to wait for BofA and its counterparts to work out all of their bad, toxic and otherwise broken down investments. They are leaving the stock in droves.
BofA's brethren are in similar straits, taking on losses since mid-April of between 25-35%. Wells Fargo has dropped from 34.25 to as low as 24.27. JP Morgan Chase has gone from a high of 48.20 to as low as 35.16. And Citigroup, usually the most actively-traded stock on the NYSE, has dipped from 5 in mid-April to 3.75 today, a neat, 25% haircut.
While Wall Street pounds the table over Washington's inaction on the fiscal front, lawmakers in Washington are eerily quiet about the fate of the nation's largest banks, seeming to want the nightmare scenario of another Japan-style deflation to just go away. The truth is that they have no clue what to do next, relying on the Federal Reserve to sop up excesses in the default markets and keep interest rates at ZERO until something good happens, whatever that might be. Washington politicians are only interested in keeping their jobs, meaning that they will purposely mislead the public into a false sense of stability until the elections this November.
In the meantime, the nation suffers and America's fiscal problems become worse by the day as the corrective measures that would have already kicked these banks to the collective curbs have not been even mentioned. Bad assets need to be written down and the companies need to take their licks, but that solution is seen as messy and untenable by the ruling elite.
The entire situation reeks of insider deals, secrecy, mismanagement and falsehood, and it is killing the US economy, little by little, day in and day out.
Dow 10,213.62, -57.59 (0.56%)
NASDAQ 2,179.76, +0.81 (0.04%)
S&P 500 1,071.69, -3.94 (0.37%)
NYSE Composite 6,813.15, -37.30 (0.54%)
On the day, there were more losers than winners, by a 3567-2778 tally. Tellingly, new lows surpassed new highs, 259-226, signaling that those who were buying all afternoon were either delusional or just misguided. The markets appear ready to break down once again to fresh lows. Dipping below the 9680 mark on the Dow over the next month is certainly in the equation. Volume was a little better than most of this week, though that's another negative. Higher volume on losing days indicates, quite simply, that more stocks are being sold than bought.
NASDAQ Volume 1,913,865,250.00
NYSE Volume 4,309,225,000
Stocks were not the only asset class being beaten down. Crude oil for September delivery fell another 97 cents, to $73.46 on the NYMEX. Gold lost $6.60, to $1,227.20, and silver was hammered down nearly 2%, losing 37 cents to close the week at $17.98 the ounce.
Deflation has come, and has actually been pushing on stocks, bond yields and home prices for the past three years. Only the federal government's ability to throw large amounts of money around has kept the economy from complete collapse, though the band-aid approach seems to have failed miserably and the eventual downturn will be more severe than anyone can imagine.
Thursday, August 19, 2010
Jobless Claims Crush Stocks; Mergers Push Valuations
There's no escaping the obvious. Initial unemployment claims for the most recent week registered at a 10-month high, with half a million Americans filing for unemployment compensation.
That news, coupled with some hard-to-believe figures from the Philadelphia Fed, wiped out all of the week's prior gains and sent stocks reeling to their lowest close in a month. The major averages have been trading below their 200-week moving averages, and cannot seem to gather enough momentum to break out of the current trading range.
Significantly, trading volume reached its highest level in a week, also marking the fourth consecutive Thursday in which stocks have traded to the downside. Despite heavy play in stock options - which expire tomorrow - and some fairly significant attempts at late-day tape-painting (or, banging the close), current momentum in strictly on the side of the bears.
A couple of merger announcements caught the market's attention, specifically, Intel's (INTC) offer of $7.7 billion in cash for internet security firm, McAfee (MFE), which boosted shares of the company to be acquired by 17 points, a 57% gain.
Also on the merger block was First Niagara's (FNFG) offer to buy all of New Alliance Bankshares (NAL), a Connecticut-based regional bank, in an all-stock deal.
Both deals pushed valuations of the acquired companies to ratios of roughly 18-20 times earnings, which, by most standards might seem reasonable, though in today's liquidity-squeezed environment seem a bit on the overpriced side of the equation.
Valuation, more than ever, is going to have meaning once again for publicly-traded firms, though it's doubtful that the rich P-E ratios of the Fortune 500 companies and Dow 30 can remain in place for long, many of them trading at 20 times current earnings or higher. In a fast-paced environment, those valuations may be appropriate, but today, when all indications are for modest growth, if any at all, valuations would be more prudently placed in the 8-12 times earnings range. Should the economy continue to worsen, even those figures would seem rich.
Valuation and price discovery, the tools of any astute investor, have been shunned for years, with Wall Street assuming that 12 to 15 times earnings is the benchmark for a stable company. In the current environment, both investors and companies seeking to purchase rivals or valued additions, had better sharpen their pencils.
One other potential acquisition, that of Potash (POT), the Canadian-based fertilizer manufacturer, by Aussie giant BHP Billiton (BHP) for $130 per share - all cash - was rejected by the company to be acquired, calling the bid "woefully inadequate," though shares of Potash have zoomed up 36 points, or about 30% since the hostile offer was tendered on Tuesday.
The whole deal sounds cockeyed on the surface, and even if BHP is desperate, should not produce any tangible combination. with earnings in the previous four quarters of $4.64, even trading at $112 per share (prior to the offer), Potash was sporting a PE of 24, well into nose-bleed territory. With the stock up to 148 at last look, valuation has to just under 32 times earnings, meaning BHP will invest enough to generate a total return of capital by the year 2042, if Potash continues to perform as it has the past year.
Considering the global footprint of both companies, the deal would make sense, though Potash may have missed the boat ad says it is seeking other suitors. Obviously, some investors believe the company is worth much more than the $130 per share, though a value investor would normally walk away shaking his or her head. In this case, the value investor is running from the mob of momentum junkies crowding the trade. The valuations are ludicrous, even if they were put up in better times.
Outside the merger mania, most stocks were sinking slowly. Not a single stock on the Dow 30 showed a gain, as investors took cash out of just about every equity investment.
Dow 10,271.21, -144.33 (1.39%)
NASDAQ 2,178.95, -36.75 (1.66%)
S&P 500 1,075.63, -18.53 (1.69%)
NYSE Composite 6,855.14, -112.94 (1.62%)
Declining issues pounded advancers by an enormous margin, 5147-1322, though it could have been worse, and likely will be within days or weeks. New highs managed to stay ahead of new lows, but just barely, 275-220. It is worth noting that there was a tremendous run-up in stocks from mid-July through December of last year, so routinely making new 52-week highs is going to be a more difficult task in weeks and months ahead.
NASDAQ Volume 2,104,113,000
NYSE Volume 4,935,496,000
Crude futures continued to slide from their ridiculous levels of earlier in the month, losing 99 cents to close at $74.43, an odd occurrence for mid-summer driving season, though inventory levels continue to indicate slack demand. Gold caught another reasonable bid, up $4.10, to $1,233.80, with $1300 now the preferred price target. Silver slipped seven cents to $18.32. One wonders how long the gold boom - now in its tenth year - can last and whether these current levels indicate a topping pattern. Quadrupling your money by simply holding onto coins or bars over the past decade seems to have been the best of all trades, even though one would not have to as much as lift a finger.
Such is the condition of markets today. Idleness may be the best recipe for preservation of capital as deflation holds prices down and punishes speculation.
That news, coupled with some hard-to-believe figures from the Philadelphia Fed, wiped out all of the week's prior gains and sent stocks reeling to their lowest close in a month. The major averages have been trading below their 200-week moving averages, and cannot seem to gather enough momentum to break out of the current trading range.
Significantly, trading volume reached its highest level in a week, also marking the fourth consecutive Thursday in which stocks have traded to the downside. Despite heavy play in stock options - which expire tomorrow - and some fairly significant attempts at late-day tape-painting (or, banging the close), current momentum in strictly on the side of the bears.
A couple of merger announcements caught the market's attention, specifically, Intel's (INTC) offer of $7.7 billion in cash for internet security firm, McAfee (MFE), which boosted shares of the company to be acquired by 17 points, a 57% gain.
Also on the merger block was First Niagara's (FNFG) offer to buy all of New Alliance Bankshares (NAL), a Connecticut-based regional bank, in an all-stock deal.
Both deals pushed valuations of the acquired companies to ratios of roughly 18-20 times earnings, which, by most standards might seem reasonable, though in today's liquidity-squeezed environment seem a bit on the overpriced side of the equation.
Valuation, more than ever, is going to have meaning once again for publicly-traded firms, though it's doubtful that the rich P-E ratios of the Fortune 500 companies and Dow 30 can remain in place for long, many of them trading at 20 times current earnings or higher. In a fast-paced environment, those valuations may be appropriate, but today, when all indications are for modest growth, if any at all, valuations would be more prudently placed in the 8-12 times earnings range. Should the economy continue to worsen, even those figures would seem rich.
Valuation and price discovery, the tools of any astute investor, have been shunned for years, with Wall Street assuming that 12 to 15 times earnings is the benchmark for a stable company. In the current environment, both investors and companies seeking to purchase rivals or valued additions, had better sharpen their pencils.
One other potential acquisition, that of Potash (POT), the Canadian-based fertilizer manufacturer, by Aussie giant BHP Billiton (BHP) for $130 per share - all cash - was rejected by the company to be acquired, calling the bid "woefully inadequate," though shares of Potash have zoomed up 36 points, or about 30% since the hostile offer was tendered on Tuesday.
The whole deal sounds cockeyed on the surface, and even if BHP is desperate, should not produce any tangible combination. with earnings in the previous four quarters of $4.64, even trading at $112 per share (prior to the offer), Potash was sporting a PE of 24, well into nose-bleed territory. With the stock up to 148 at last look, valuation has to just under 32 times earnings, meaning BHP will invest enough to generate a total return of capital by the year 2042, if Potash continues to perform as it has the past year.
Considering the global footprint of both companies, the deal would make sense, though Potash may have missed the boat ad says it is seeking other suitors. Obviously, some investors believe the company is worth much more than the $130 per share, though a value investor would normally walk away shaking his or her head. In this case, the value investor is running from the mob of momentum junkies crowding the trade. The valuations are ludicrous, even if they were put up in better times.
Outside the merger mania, most stocks were sinking slowly. Not a single stock on the Dow 30 showed a gain, as investors took cash out of just about every equity investment.
Dow 10,271.21, -144.33 (1.39%)
NASDAQ 2,178.95, -36.75 (1.66%)
S&P 500 1,075.63, -18.53 (1.69%)
NYSE Composite 6,855.14, -112.94 (1.62%)
Declining issues pounded advancers by an enormous margin, 5147-1322, though it could have been worse, and likely will be within days or weeks. New highs managed to stay ahead of new lows, but just barely, 275-220. It is worth noting that there was a tremendous run-up in stocks from mid-July through December of last year, so routinely making new 52-week highs is going to be a more difficult task in weeks and months ahead.
NASDAQ Volume 2,104,113,000
NYSE Volume 4,935,496,000
Crude futures continued to slide from their ridiculous levels of earlier in the month, losing 99 cents to close at $74.43, an odd occurrence for mid-summer driving season, though inventory levels continue to indicate slack demand. Gold caught another reasonable bid, up $4.10, to $1,233.80, with $1300 now the preferred price target. Silver slipped seven cents to $18.32. One wonders how long the gold boom - now in its tenth year - can last and whether these current levels indicate a topping pattern. Quadrupling your money by simply holding onto coins or bars over the past decade seems to have been the best of all trades, even though one would not have to as much as lift a finger.
Such is the condition of markets today. Idleness may be the best recipe for preservation of capital as deflation holds prices down and punishes speculation.
Wednesday, August 18, 2010
That Giant Sucking Sound
I suppose this post should be dedicated to Ross Perot, whose words inspired today's title.
Ross Perot was the last of the great third party candidates for president way back in 1992 when he intoned those fateful words as part of his closing remarks during a debate with then-president George H.W. Bush and future leader of the free world, William Jefferson Clinton. The short video clip is embedded below.
Perot was describing the flight of US jobs to Mexico and boy, was he ever right. Not only did jobs flee the land of the free to South of the border, but eventually entire factories were dismantled and shipped to China, where wages were ever cheaper.
Now, with Washington on its knees before the giant banking interests of Wall Street and begging the Chinese to keep buying our Treasury bonds, the path has come full circle. America is bankrupt, without a reliable manufacturing base, and its citizens are being sucked dry by banks, utilities (many owned by foreign corporations, thanks in no small part to Senator "Sell Out" Schumer of New York), and giant multi-national corporations which could care less whether or not anyone has a job, only whether they can pay the cable bill or shop at Wal-Mart or finance the purchase of a brand-spanking new car from one of our bailed-out auto companies.
There are no jobs, though there's money spread across the fruited plain thanks to our glorious benefactors in Washington, who seem intent on putting all Americans on the dole. There are, however, many corporations whose shares are traded publicly on Wall Street, though interest in many of them seems to be waning, or, possibly all worn out.
Trading volumes reached new levels of apathy today, especially on the NASDAQ, recording its lowest volume of the year and lowest since December 30 of last year. It was abysmal. Maybe that giant sucking sound is the sound of your 401k plan going to an early death, prior to your retirement, or the vastly underfunded pension plans of many corporations and municipalities going down the tubes in a giant "whoosh."
As for yesterday's options-inspired rally, well, that's over, pending the release of initial unemployment claims tomorrow morning.
Dow 10,415.54, +9.69 (0.09%)
NASDAQ 2,215.70, +6.26 (0.28%)
S&P 500 1,094.16, +1.62 (0.15%)
NYSE Composite 6,968.08, +8.29 (0.12%)
Advancers beat decliners by a diminishing margin at the closing bell, 3511-2875. New highs held their own against new lows, 315-86. Volume was absurdly low. The insiders will begin the process of gnawing at each other's flesh presently.
NASDAQ Volume 1,547,742,875
NYSE Volume 4,239,987,500
Oil finished lower again, down 35 cents, to $75.42, though it traded below $74 earlier in the day. Gold gained $3.10, to $1,229.70. Silver finished down 20 cents, at $18.39.
That giant sucking sound may just be the sound of traders leaving Wall Street and joining the ranks of the unemployed. The double dip is on the way.
Ross Perot was the last of the great third party candidates for president way back in 1992 when he intoned those fateful words as part of his closing remarks during a debate with then-president George H.W. Bush and future leader of the free world, William Jefferson Clinton. The short video clip is embedded below.
Perot was describing the flight of US jobs to Mexico and boy, was he ever right. Not only did jobs flee the land of the free to South of the border, but eventually entire factories were dismantled and shipped to China, where wages were ever cheaper.
Now, with Washington on its knees before the giant banking interests of Wall Street and begging the Chinese to keep buying our Treasury bonds, the path has come full circle. America is bankrupt, without a reliable manufacturing base, and its citizens are being sucked dry by banks, utilities (many owned by foreign corporations, thanks in no small part to Senator "Sell Out" Schumer of New York), and giant multi-national corporations which could care less whether or not anyone has a job, only whether they can pay the cable bill or shop at Wal-Mart or finance the purchase of a brand-spanking new car from one of our bailed-out auto companies.
There are no jobs, though there's money spread across the fruited plain thanks to our glorious benefactors in Washington, who seem intent on putting all Americans on the dole. There are, however, many corporations whose shares are traded publicly on Wall Street, though interest in many of them seems to be waning, or, possibly all worn out.
Trading volumes reached new levels of apathy today, especially on the NASDAQ, recording its lowest volume of the year and lowest since December 30 of last year. It was abysmal. Maybe that giant sucking sound is the sound of your 401k plan going to an early death, prior to your retirement, or the vastly underfunded pension plans of many corporations and municipalities going down the tubes in a giant "whoosh."
As for yesterday's options-inspired rally, well, that's over, pending the release of initial unemployment claims tomorrow morning.
Dow 10,415.54, +9.69 (0.09%)
NASDAQ 2,215.70, +6.26 (0.28%)
S&P 500 1,094.16, +1.62 (0.15%)
NYSE Composite 6,968.08, +8.29 (0.12%)
Advancers beat decliners by a diminishing margin at the closing bell, 3511-2875. New highs held their own against new lows, 315-86. Volume was absurdly low. The insiders will begin the process of gnawing at each other's flesh presently.
NASDAQ Volume 1,547,742,875
NYSE Volume 4,239,987,500
Oil finished lower again, down 35 cents, to $75.42, though it traded below $74 earlier in the day. Gold gained $3.10, to $1,229.70. Silver finished down 20 cents, at $18.39.
That giant sucking sound may just be the sound of traders leaving Wall Street and joining the ranks of the unemployed. The double dip is on the way.
Tuesday, August 17, 2010
Why Stocks Were Up, in One Word
I'm going to keep today's notes brief, since it's a beautiful summer day and the market is, as usual, defying all logic.
Were stocks ahead because key economic data was better than expected? Possibly. The PPI for July was up 0.2%, with the core up a whopping 0.3%, allaying fears of deflation for the moment. Housing Starts and building permits were somewhat of a disappointment, however, though July industrial production was up by a full percentage point and Capacity Utilization stood at 74.8%, up from 74.1% in June.
Those numbers were benign, and volume was once again extremely sluggish, so there's only one reason stocks went up today: options. Or, more accurately, the expiration of stock options this Friday.
In recent trading - over the past 7 months which we bothered to check - the major indices have almost always shown some kind of gains early in the week leading up to options expiration, like clockwork, except in May, when stocks and the economy were actually showing real strain from problems. It's pretty simple, and an easy strategy for market-timers. But, is it investor sentiment or manipulation, and, does it matter?
Short term, trading moves matter, especially when you have money at risk, as in the options market. Long term, the blips obtained in weeks of options expirations or the weeks preceding them are more noise than valuable data points. As for whether the pattern arises out of investor sentiment or manipulation, which have been becoming more synonymous of late, the latter seems a too-obvious choice, but there it is, laid out for everyone to see.
Supposing you had some money riding on certain strike points, or you could make money on gains, and, if you were a major investment house, like Goldman Sachs, BofA, et. al., with tons of excess capital sitting around gathering dust, wouldn't it behoove you to invest some of that idle capital in the stocks you need to rise, thus ensuring short term gains in your options trading? Absolutely. Do the big firms do that? Positively.
While they call it astute trading discipline, others might figure it a little less than honest poker, but, since options are highly unregulated conveyances, nobody bothers to make a squeal about it. For the investor, it makes for a simple calendar rule: buy stocks near the end of the month or early in the month, preferably the first week, because the price you pay will almost always be lower than it will approaching options expiration.
And that's why stocks were up today, and the only reason why. For more proof, just take a gander at the volumes, which were again at "help me, I'm drowning" levels. The low volume regime persists, so higher closes, especially major advances, like today's, should be weighted accordingly. Better yet, compare the highs of the day to the close. A bit of a selloff there in the last hour, the tell-tale sign of options sales and/or redemption, and plenty of play on the intra-day movement. The Dow lost about 70 points in the final hour. Healthy markets don't do that, they close at or near the highs. Conclusion: this was yet another manipulated trading move; market weakness still exists; nobody is really buying.
Dow 10,405.85, +103.84 (1.01%)
NASDAQ 2,209.44, +27.57 (1.26%)
S&P 500 1,092.54, +13.16 (1.22%)
NYSE Composite 6,959.79, +88.21 (1.28%)
Naturally, advancers beat decliners handily, 5008-1490. New highs soared past new lows, 335-80.
NASDAQ Volume 1,631,266,000
NYSE Volume 4,241,545,500
Commodities were mostly higher. Oil traded up by 53 cents, to $75.77. Gold gained $2.10, to $1,226.60. Silver added 17 cents to $18.59.
Stocks should continue this pattern for another day or two, probably peaking on Thursday, which would be a great time to go short the market. By Monday of next week, everything should be trading at lower levels, if history proves correct.
Were stocks ahead because key economic data was better than expected? Possibly. The PPI for July was up 0.2%, with the core up a whopping 0.3%, allaying fears of deflation for the moment. Housing Starts and building permits were somewhat of a disappointment, however, though July industrial production was up by a full percentage point and Capacity Utilization stood at 74.8%, up from 74.1% in June.
Those numbers were benign, and volume was once again extremely sluggish, so there's only one reason stocks went up today: options. Or, more accurately, the expiration of stock options this Friday.
In recent trading - over the past 7 months which we bothered to check - the major indices have almost always shown some kind of gains early in the week leading up to options expiration, like clockwork, except in May, when stocks and the economy were actually showing real strain from problems. It's pretty simple, and an easy strategy for market-timers. But, is it investor sentiment or manipulation, and, does it matter?
Short term, trading moves matter, especially when you have money at risk, as in the options market. Long term, the blips obtained in weeks of options expirations or the weeks preceding them are more noise than valuable data points. As for whether the pattern arises out of investor sentiment or manipulation, which have been becoming more synonymous of late, the latter seems a too-obvious choice, but there it is, laid out for everyone to see.
Supposing you had some money riding on certain strike points, or you could make money on gains, and, if you were a major investment house, like Goldman Sachs, BofA, et. al., with tons of excess capital sitting around gathering dust, wouldn't it behoove you to invest some of that idle capital in the stocks you need to rise, thus ensuring short term gains in your options trading? Absolutely. Do the big firms do that? Positively.
While they call it astute trading discipline, others might figure it a little less than honest poker, but, since options are highly unregulated conveyances, nobody bothers to make a squeal about it. For the investor, it makes for a simple calendar rule: buy stocks near the end of the month or early in the month, preferably the first week, because the price you pay will almost always be lower than it will approaching options expiration.
And that's why stocks were up today, and the only reason why. For more proof, just take a gander at the volumes, which were again at "help me, I'm drowning" levels. The low volume regime persists, so higher closes, especially major advances, like today's, should be weighted accordingly. Better yet, compare the highs of the day to the close. A bit of a selloff there in the last hour, the tell-tale sign of options sales and/or redemption, and plenty of play on the intra-day movement. The Dow lost about 70 points in the final hour. Healthy markets don't do that, they close at or near the highs. Conclusion: this was yet another manipulated trading move; market weakness still exists; nobody is really buying.
Dow 10,405.85, +103.84 (1.01%)
NASDAQ 2,209.44, +27.57 (1.26%)
S&P 500 1,092.54, +13.16 (1.22%)
NYSE Composite 6,959.79, +88.21 (1.28%)
Naturally, advancers beat decliners handily, 5008-1490. New highs soared past new lows, 335-80.
NASDAQ Volume 1,631,266,000
NYSE Volume 4,241,545,500
Commodities were mostly higher. Oil traded up by 53 cents, to $75.77. Gold gained $2.10, to $1,226.60. Silver added 17 cents to $18.59.
Stocks should continue this pattern for another day or two, probably peaking on Thursday, which would be a great time to go short the market. By Monday of next week, everything should be trading at lower levels, if history proves correct.
Monday, August 16, 2010
Equities Remain Stuck in Liquidity Trap
What would you do if you threw a party and nobody showed up?
Well, that's how brokers on Wall Street must be feeling, because there's a serious lack of trading going on these days. For well over a week now, stocks have been stuck within the deafening silence of a liquidity trap, bought about by an overwhelming amount of distrust, absence of investable capital and uncertainty about the future.
Individual investors - and, to a growing degree, some fund managers - have found safety and serenity in the simplicity of cash. Others have opted for money market returns of less than one percent, still more have waded into the refreshing bond waters or ventured into gold or other commodities.
Stocks, for better or worse, have fallen out of favor in the aftermath of the 08-09 meltdown, aided by government programs which were designed to spur demand but instead have only created one-off events, like the cash for clunkers fiasco or the failed stimulus that gave $8000 tax breaks to home owners.
Sure, the people who took advantage of government largesse got their new cars or their new homes, more than likely at inflated prices (we'll know for sure in another 12-18 months), but there was no appreciable overall gain in new buyers. Maybe most folks just like keeping what they have, secure in the fact that - especially in the case of cars - it's paid for or, with a house, knowing what it's roughly worth.
Still others are stuck with properties at inflated values. Recent home-buyers of 2003-2007 vintage are nearly universally upside-down, stuck with payments on outrageous mortgages while the value of their real estate continues a precipitous decline.
In this disheveled state of affairs, the last thing on people's minds is putting more money into the stock market, either by buying individual stocks, mutual funds or increasing the funding of their 401k plan. The average American has gotten the message loud and clear: save and save more. Non-essential purchases are being put on hold more often and investment decisions are based upon more immediate needs rather than with a long-term perspective. Besides, there's a real feeling that Wall Street is rotten and crooked and that stocks, as they have gone nowhere for the past ten years, look more and more like losing propositions.
Trading volumes on the major exchanges have been in a prolonged decline, and even for August, the recent volumes speak of something more sinister and pernicious than simply everybody being on vacation. There's no excitement or impetus for stocks to rise, and Monday's trade was more than likely bolstered by a fresh infusion of cash from the banks and brokerages. The Dow dipped 70 points right at the open before a sudden reversal just minutes into the session.
Once the averages found a more suitable footing, they just churned in a narrow range of about 50 points on the Dow before another minor blip downward and another round of funding from the "masters of the universe" at Goldman Sachs, JP Morgan and Merrill Lynch, BofA's trading arm.
This is a very serious condition which is not going to be solved without another blood-letting in stocks. The absence of confidence has spread all the way from Main Street to Washington to the canyons of Wall Street and now it's locked in place. Until somebody proves that stocks are safe and the economy is really on a rebound (impossible), the direction will be down, down and then down some more. Today's minor gains are overshadowed by the paucity of trading.
Dow 10,302.01, -1.14 (0.01%)
NASDAQ 2,181.87, +8.39 (0.39%)
S&P 500 1,079.38, +0.13 (0.01%)
NYSE Composite 6,871.58, +10.54 (0.15%)
Advancing issues took command over decliners, 3980-2440. There were 311 new highs and 223 new lows, but nobody is really bothering to keep score. Volume reached a new low on Monday, below the abysmal numbers from the previous Monday, which was off-the-charts ugly. People simply aren't interested in stocks right now, and for many good reasons.
NASDAQ Volume 1,636,439,375
NYSE Volume 3,569,886,750
Oil was down again, losing 15 cents, to $75.24, but gold gained $9.60, to $1,224.50. Silver was also up, better by 32 cents, to $18.42.
There was some small economic data, including the NY Fed's Empire Manufacturing Index, which came in with a reading of 7.10 for August after a 5.8 posting in July. The index is stuck at extreme low levels, indicating very modest growth, if any, with falling prices and negative future outlooks. It's not a pretty picture and New York is one of the better-performing areas of the country.
Prior to the open Tuesday, a number of important economic indicators will be released, including July PPI, housing starts and building permits. The numbers are expected to be flat or even down from June, which is just the kind of news Wall Street does not need at this juncture.
The true picture being painted by this low-volume regime is one bereft of confidence and capital. Like just about everything else in the current climate, it is unsustainable for more than a very short period of time, one which will be coming to an abrupt end shortly.
Well, that's how brokers on Wall Street must be feeling, because there's a serious lack of trading going on these days. For well over a week now, stocks have been stuck within the deafening silence of a liquidity trap, bought about by an overwhelming amount of distrust, absence of investable capital and uncertainty about the future.
Individual investors - and, to a growing degree, some fund managers - have found safety and serenity in the simplicity of cash. Others have opted for money market returns of less than one percent, still more have waded into the refreshing bond waters or ventured into gold or other commodities.
Stocks, for better or worse, have fallen out of favor in the aftermath of the 08-09 meltdown, aided by government programs which were designed to spur demand but instead have only created one-off events, like the cash for clunkers fiasco or the failed stimulus that gave $8000 tax breaks to home owners.
Sure, the people who took advantage of government largesse got their new cars or their new homes, more than likely at inflated prices (we'll know for sure in another 12-18 months), but there was no appreciable overall gain in new buyers. Maybe most folks just like keeping what they have, secure in the fact that - especially in the case of cars - it's paid for or, with a house, knowing what it's roughly worth.
Still others are stuck with properties at inflated values. Recent home-buyers of 2003-2007 vintage are nearly universally upside-down, stuck with payments on outrageous mortgages while the value of their real estate continues a precipitous decline.
In this disheveled state of affairs, the last thing on people's minds is putting more money into the stock market, either by buying individual stocks, mutual funds or increasing the funding of their 401k plan. The average American has gotten the message loud and clear: save and save more. Non-essential purchases are being put on hold more often and investment decisions are based upon more immediate needs rather than with a long-term perspective. Besides, there's a real feeling that Wall Street is rotten and crooked and that stocks, as they have gone nowhere for the past ten years, look more and more like losing propositions.
Trading volumes on the major exchanges have been in a prolonged decline, and even for August, the recent volumes speak of something more sinister and pernicious than simply everybody being on vacation. There's no excitement or impetus for stocks to rise, and Monday's trade was more than likely bolstered by a fresh infusion of cash from the banks and brokerages. The Dow dipped 70 points right at the open before a sudden reversal just minutes into the session.
Once the averages found a more suitable footing, they just churned in a narrow range of about 50 points on the Dow before another minor blip downward and another round of funding from the "masters of the universe" at Goldman Sachs, JP Morgan and Merrill Lynch, BofA's trading arm.
This is a very serious condition which is not going to be solved without another blood-letting in stocks. The absence of confidence has spread all the way from Main Street to Washington to the canyons of Wall Street and now it's locked in place. Until somebody proves that stocks are safe and the economy is really on a rebound (impossible), the direction will be down, down and then down some more. Today's minor gains are overshadowed by the paucity of trading.
Dow 10,302.01, -1.14 (0.01%)
NASDAQ 2,181.87, +8.39 (0.39%)
S&P 500 1,079.38, +0.13 (0.01%)
NYSE Composite 6,871.58, +10.54 (0.15%)
Advancing issues took command over decliners, 3980-2440. There were 311 new highs and 223 new lows, but nobody is really bothering to keep score. Volume reached a new low on Monday, below the abysmal numbers from the previous Monday, which was off-the-charts ugly. People simply aren't interested in stocks right now, and for many good reasons.
NASDAQ Volume 1,636,439,375
NYSE Volume 3,569,886,750
Oil was down again, losing 15 cents, to $75.24, but gold gained $9.60, to $1,224.50. Silver was also up, better by 32 cents, to $18.42.
There was some small economic data, including the NY Fed's Empire Manufacturing Index, which came in with a reading of 7.10 for August after a 5.8 posting in July. The index is stuck at extreme low levels, indicating very modest growth, if any, with falling prices and negative future outlooks. It's not a pretty picture and New York is one of the better-performing areas of the country.
Prior to the open Tuesday, a number of important economic indicators will be released, including July PPI, housing starts and building permits. The numbers are expected to be flat or even down from June, which is just the kind of news Wall Street does not need at this juncture.
The true picture being painted by this low-volume regime is one bereft of confidence and capital. Like just about everything else in the current climate, it is unsustainable for more than a very short period of time, one which will be coming to an abrupt end shortly.
Friday, August 13, 2010
Sorry Finish for Stocks
It was one of the dullest weeks for trading stocks in memory, with volumes approaching 1990s levels or worse. The apparent lack of conviction, coupled with continued poor economic news contributed to a nasty decline on all the major averages.
Monday was the only positive finish of the week, so stocks have hit the skids four straight sessions. Today's volume figures were as low as Monday's, following three consecutive down days in which volumes improved each successive session.
The July CPI was bloated at a gain of 0.3%, which, when auto and gasoline sales were stripped out, turned into a -0.1%. Deflationary forces are ever-present, though tricky to track at this juncture. While some items are improving in price, others fall on slack demand. Persistent weakness in housing and stocks has spilled over into bonds, which are soaring if you're a seller, falling precipitously in yield. The 10 and 30-year are now sliding in tandem, offering multi-year low returns.
Dow 10,303.15, -16.80 (0.16%)
NASDAQ 2,173.48, -16.79 (0.77%)
S&P 500 1,079.25, -4.36 (0.40%)
NYSE Composite 6,861.04, -20.90 (0.30%)
With trading nearly ground to a halt, decliners beat back advancers by a healthy margin, 3847-2548, belying the headline figures. There were 258 new highs to 214 new lows, though the number of new 52-week lows on the NASDAQ was nearly six times that of new highs.
NASDAQ Volume 1,623,953,000
NYSE Volume 3,819,334,750
The lackluster equity trade seemed to ensnare commodities as well, with oil falling again, though down only 35 cents, t0 $75.39. Gold gained a slim dime, to $1,214.90, while silver added 4 cents, to $18.10.
It may be the middle of summer, when trading volumes are traditionally slow, but this week was probably the lowest volume week in a year marred by an absence of trading activity. Not only have individual investors headed to the safety to cash or bonds, but larger entities have trimmed their activity as well.
None of this bodes well going forward, and with good reason. The economy is managed by buffoons in Washington and crooks on Wall Street, to the benefit of almost nobody.
Monday was the only positive finish of the week, so stocks have hit the skids four straight sessions. Today's volume figures were as low as Monday's, following three consecutive down days in which volumes improved each successive session.
The July CPI was bloated at a gain of 0.3%, which, when auto and gasoline sales were stripped out, turned into a -0.1%. Deflationary forces are ever-present, though tricky to track at this juncture. While some items are improving in price, others fall on slack demand. Persistent weakness in housing and stocks has spilled over into bonds, which are soaring if you're a seller, falling precipitously in yield. The 10 and 30-year are now sliding in tandem, offering multi-year low returns.
Dow 10,303.15, -16.80 (0.16%)
NASDAQ 2,173.48, -16.79 (0.77%)
S&P 500 1,079.25, -4.36 (0.40%)
NYSE Composite 6,861.04, -20.90 (0.30%)
With trading nearly ground to a halt, decliners beat back advancers by a healthy margin, 3847-2548, belying the headline figures. There were 258 new highs to 214 new lows, though the number of new 52-week lows on the NASDAQ was nearly six times that of new highs.
NASDAQ Volume 1,623,953,000
NYSE Volume 3,819,334,750
The lackluster equity trade seemed to ensnare commodities as well, with oil falling again, though down only 35 cents, t0 $75.39. Gold gained a slim dime, to $1,214.90, while silver added 4 cents, to $18.10.
It may be the middle of summer, when trading volumes are traditionally slow, but this week was probably the lowest volume week in a year marred by an absence of trading activity. Not only have individual investors headed to the safety to cash or bonds, but larger entities have trimmed their activity as well.
None of this bodes well going forward, and with good reason. The economy is managed by buffoons in Washington and crooks on Wall Street, to the benefit of almost nobody.
Thursday, August 12, 2010
No Cat, No Bounce In Dead Trade
Normally, following a massive decline like the one Wednesday, traders will be looking to see if the market shows any signs of strength with a bounce the following session. In bull markets, there's almost always some buoyancy with buyers stepping in to scoop up what they deem bargains. Even during bear markets there is usually enough optimism to promote some short-term relief, but there was none to be found on Thursday, as the major exchanges wrote down their third straight session on the red side of the ledger.
Although the markets opened down heavily and within minutes were trading at what would eventually be the lows of the day, stocks spent the entire session below the unchanged line, without even a hint of buying. This is a very bad sign for anybody holding stocks right now. An acute lack of buyers in the public marketplace presages not only a severe downturn in the values of stocks, but potentially a liquidity crisis in which stocks cannot even trade efficiently.
If there's going to be another shock to the financial system, it's likely to be in the form of liquidity since we've already entered into a deflationary environment. The one asset hailed as supreme during deflationary periods is CASH, simply because that's what everyone covets. Stocks will be shunned, and eventually bonds too, as the wisest choice will be seen as fast-appreciating cash, because it will buy more tomorrow than today as asset values are pounded down into the earth.
Since sellers are normally looking to "cash out" of positions, what happens when they don't recirculate their cash back into the equity markets is a lack of liquidity. This soon turns into a vortex, as buyers cannot be found except at deeply-discounted prices, sucking down the value of stocks with every trade. The abnormally low volume witnessed over the past week demonstrates, quite clearly, that buying interest has all but dried up. It's only a matter of time before stock holders cash in their chips and leave the markets for a long, long time.
Dow 10,319.95, -58.88 (0.57%)
NASDAQ 2,190.27, -18.36 (0.83%)
S&P 500 1,083.61, -5.86 (0.54%)
NYSE Composite 6,881.94, -20.77 (0.30%)
Declining issues ramped past advancers on the day, 3788-2646. Even more telling was the now-complete about-face in the daily new highs and lows. New lows took the upper hand for the second straight session, by a widening margin of 264-209. While volume has been decried as out of order, it is worth noting that the only positive daily finish of the week (Monday) was accompanied by the lowest volume, by a long shot. Overall, trading volume has improved each successive day since, though every day was a losing one. That's about all one needs to know about whether or not this downturn will continue. Volume continues to gain strength as more and more traders hit the panic button and sell. Since Tuesday was only the beginning of this current round of equity liquidation, expect further declines and the same or higher trading volumes in days and weeks ahead. There seems to be no stopping the markets from engaging in a race to the price discovery bottom.
NASDAQ Volume 2,211,456,250
NYSE Volume 4,563,876,000
As the dollar gained strength again, oil prices careened downward, losing $2.28, to $75.74, a quick reversal from the trades last week above the $80 mark. Gold got a sizable lift, up $17.30, to $1,214.80, now that speculators can read the Fed's hand without even having to peek. The Fed is out to eventually rip up the currency, making gold more valuable, and trader's aren't particularly concerned with short-term dollar strength, like today. They're ready to dive into gold and drive it to new highs, something that should surprise nobody, as gold has outperformed every other asset on nearly every level over the past ten years.
Silver gained slightly, adding 16 cents, to $18.05.
The markets were blind-sided once again prior to the open by another depressing report on initial unemployment claims, up to 484,000, following last week's stunning 479,000, which was revised higher, to 482,000. Not only are jobs not being created in the United States, more companies are beginning to lay workers off as the economy has stalled. If unemployment continues to rise, there is no hope for a recovery, which seems obvious. The double-dip recession which so many have discounted as unlikely, now seems a certainty, though one wonders why it took so many people so long to admit it.
For what it's worth, Bank of America (BAC) closed at another 52-week low today, down 13 cents, at 13.06.
Tomorrow's CPI report for July should show the effects of a moribund economy. Unless I've been completely wrong the past three years, the number should be lower, signifying further deflation.
Although the markets opened down heavily and within minutes were trading at what would eventually be the lows of the day, stocks spent the entire session below the unchanged line, without even a hint of buying. This is a very bad sign for anybody holding stocks right now. An acute lack of buyers in the public marketplace presages not only a severe downturn in the values of stocks, but potentially a liquidity crisis in which stocks cannot even trade efficiently.
If there's going to be another shock to the financial system, it's likely to be in the form of liquidity since we've already entered into a deflationary environment. The one asset hailed as supreme during deflationary periods is CASH, simply because that's what everyone covets. Stocks will be shunned, and eventually bonds too, as the wisest choice will be seen as fast-appreciating cash, because it will buy more tomorrow than today as asset values are pounded down into the earth.
Since sellers are normally looking to "cash out" of positions, what happens when they don't recirculate their cash back into the equity markets is a lack of liquidity. This soon turns into a vortex, as buyers cannot be found except at deeply-discounted prices, sucking down the value of stocks with every trade. The abnormally low volume witnessed over the past week demonstrates, quite clearly, that buying interest has all but dried up. It's only a matter of time before stock holders cash in their chips and leave the markets for a long, long time.
Dow 10,319.95, -58.88 (0.57%)
NASDAQ 2,190.27, -18.36 (0.83%)
S&P 500 1,083.61, -5.86 (0.54%)
NYSE Composite 6,881.94, -20.77 (0.30%)
Declining issues ramped past advancers on the day, 3788-2646. Even more telling was the now-complete about-face in the daily new highs and lows. New lows took the upper hand for the second straight session, by a widening margin of 264-209. While volume has been decried as out of order, it is worth noting that the only positive daily finish of the week (Monday) was accompanied by the lowest volume, by a long shot. Overall, trading volume has improved each successive day since, though every day was a losing one. That's about all one needs to know about whether or not this downturn will continue. Volume continues to gain strength as more and more traders hit the panic button and sell. Since Tuesday was only the beginning of this current round of equity liquidation, expect further declines and the same or higher trading volumes in days and weeks ahead. There seems to be no stopping the markets from engaging in a race to the price discovery bottom.
NASDAQ Volume 2,211,456,250
NYSE Volume 4,563,876,000
As the dollar gained strength again, oil prices careened downward, losing $2.28, to $75.74, a quick reversal from the trades last week above the $80 mark. Gold got a sizable lift, up $17.30, to $1,214.80, now that speculators can read the Fed's hand without even having to peek. The Fed is out to eventually rip up the currency, making gold more valuable, and trader's aren't particularly concerned with short-term dollar strength, like today. They're ready to dive into gold and drive it to new highs, something that should surprise nobody, as gold has outperformed every other asset on nearly every level over the past ten years.
Silver gained slightly, adding 16 cents, to $18.05.
The markets were blind-sided once again prior to the open by another depressing report on initial unemployment claims, up to 484,000, following last week's stunning 479,000, which was revised higher, to 482,000. Not only are jobs not being created in the United States, more companies are beginning to lay workers off as the economy has stalled. If unemployment continues to rise, there is no hope for a recovery, which seems obvious. The double-dip recession which so many have discounted as unlikely, now seems a certainty, though one wonders why it took so many people so long to admit it.
For what it's worth, Bank of America (BAC) closed at another 52-week low today, down 13 cents, at 13.06.
Tomorrow's CPI report for July should show the effects of a moribund economy. Unless I've been completely wrong the past three years, the number should be lower, signifying further deflation.
Wednesday, August 11, 2010
Bearish Cycle Phase Two Begins As Global Markets Careen Lower
A year from now, there will be many people wishing they had sold TODAY, tomorrow or within the next few weeks. That's because in a year to eighteen months, stocks will probably be flat on their backs and Dow 10,000 will seem like a dream from some long-abandoned, mythical place in which stocks had value and companies made profits.
Beginning with the Fed's understated announcement yesterday that they would replenish their balance sheet by selling mortgage and agency debt and replacing it with shorter-term treasuries, the Phase 2 of the Bear Market Cycle has officially begun. In reality, the market break came in April, but deflation-deniers and recovery junkies saw that as a mere correction, a soft patch, a buying opportunity, when in reality, the break below the 200-day moving averages on the major exchanges was a major tipping point, signaling uncertainty and despair in markets stemming from unsustainable long-term economic conditions.
What began as a fraud, the sub-prime crisis, in which billions were swindled from the system and from individuals and from taxpayers (people not even engaged in the market), has evolved into a serious debate over the future of the United States of America and its Ponzi-like scheme of unfunded liabilities (mainly Social Security, Medicare and Medicade), debt-laced, unbalanced state and federal budgets and a national debt well into the trillions of dollars which will never be repaid.
Phase one was the meltdown of Autumn 2008 into 2009, with the requisite recovery bounce in the markets which gracefully lasted for over a year. Phase two is likely to last longer, move at a slower pace, but end up being even more severe. By the end of phase two, prior to another false bounce, most stock prices will lose half of their value or more as the panic and race for liquidity (cash) ensues. Figure that this phase will take us through the next election cycle, through the end of 2012, before any meaningful bounce, more than likely tied to false hope of a new "conservative" president and congress.
The end will come sometime within the following years - not to put too fine a point upon it - within the first two years of the next administration, when fear and panic have turned to rage and near-anarchy, when stocks will be viewed with contempt and the government (given there even is a government in control) disrespected and almost universally hated and blamed (rightfully) for the entire collapse of the economy.
In phase two, bottoms will form below the previous 2009 lows. The Dow will likely bottom out in the 4500-5000 range, the S&P around 450 and the NASDAQ in the range of 950 to 1100. After a brief sideways to upward move which will suck the last remaining dollars from those foolish enough to jump into the market while it is still collapsing, the major indices will approach levels not seen in 30 years or more. By 2014 the Dow Jones Industrials may well be hovering around 2-3000, the S&P 500 in the 300 range and the NASDAQ shattered beyond belief, possibly around 600-750. Stocks will lose almost all of their value, just as many did during the Great Depression of the 1930s, because, in reality, we are entering the most brutal stage of an even Greater Depression, one which, in all likelihood, will finish the Federal Reserve, fractional banking and fiat money.
Gold will probably reign, selling at unbelievable prices of over $4000 per ounce, as the last and only reliable store of value.
Of course, time being purely a relative factor in the grand economic experiment of the Keynesians, phases two and three could all occur in a much more compressed time frame. There will be days of maximum despair, of the Dow losing 1000 points in a day, aided by computer-generated program trading. There is no escaping the truth, nor the massive, unpayable debt the nation's leaders have promised. Life in America is about to undergo an incredible transformation, from a great nation to a poor one, and we have nobody to blame but the politicians we elected, for they have truly sold out the American people to bankers, frauds, liars and thieves.
Those who believe the next election will usher in some new form of direction or control are absolutely without a clue. The current office-holders will only be replaced by more-corrupt, less talented crooks, liars and clowns, who have neither any skill at governing nor any intention of restoring the country to the middle-class values upon which it was founded.
On the day, stocks were spanked right out of the gate, with the Dow down more than 200 points within minutes and the NASDAQ taking the brunt of the assault, off by more than 60 points in the early going. Stocks did not even attempt a rally at any point during the session, indicating broad distribution and a severe lack of buyers.
Bears took the day fully, and are just getting warmed up for the slaughter that is certain to occur over the next two months, as economic data will continue to demonstrate severe weakness in markets and stresses to the financial core. It is worth noting that US indices were not alone in their decimation. Asian and European bourses also were down by significant levels.
There was significant chart damage to the major averages. All closed well below their 200-day moving averages, a move widely expected only by honest economists with market understanding. The Dow fared better than the rest of the averages, as most of the representative stocks carry dividends, holding their values a little bit better than the majority of publicly-traded equities.
Dow 10,378.83, -265.42 (2.49%)
NASDAQ 2,208.63, -68.54 (3.01%)
S&P 500 1,089.47, -31.59 (2.82%)
NYSE Composite 6,902.72, -237.03 (3.32%)
Internals showed just how severe the damage was. Declining issues absolutely punished advancers, by a 6-to-1 tally, 5600-922. New lows clambered past new highs for the first time in well over a month, 216-210, a trend worth watching, which is likely to continue flashing bearish indications. Volume, though still at reduced levels, was much stronger today than on any of the previous two days of the week. There was enough selling strength to indicate more strain to come for the rest of the week and no end in sight, near-term.
NASDAQ Volume 2,114,243,500
NYSE Volume 4,857,608,500
On the commodity front, crude oil was crushed by the appreciation of the US dollar against most other currencies, especially the Euro, sending the front-end futures contracts down $2.23, to $78.02, the lowest level in two weeks. While most consider gold to be a safe haven, it was not an overwhelming favorite, gaining $1.30, to $1,197.50, though its positive finish was much more acceptable than what occurred in equities. The issue with gold is that it is, as a store of value, also inert. It has no usefulness other than as a place-holder. In times of unusual economic stress and especially in illiquid markets, there is a tendency for redemption. Gold gets liquidated just as quickly as other assets, as was seen during the 2008-09 phase of the crisis. It is, however, more resilient, and will probably, in the long run, prove to be more valued than any paper assets, like stocks or even cash.
The more-commoditized metal, silver, slipped 26 cents, to $17.89. One would expect silver to relinquish gains at a faster pace than gold, though it is likely more volatile as well.
It's not the beginning of the end, nor is it too late to make changes in one's asset allocations, from stocks and bonds into gold, cash, tools of trade and arable land. For those chasing value, like the millions stuck in mutual funds, pension funds and the like, there is nothing but pain ahead for years to come.
Many household names hit new 52-week lows, including our personal favorite, the discredited and illiquid Bank of America (BAC).
Beginning with the Fed's understated announcement yesterday that they would replenish their balance sheet by selling mortgage and agency debt and replacing it with shorter-term treasuries, the Phase 2 of the Bear Market Cycle has officially begun. In reality, the market break came in April, but deflation-deniers and recovery junkies saw that as a mere correction, a soft patch, a buying opportunity, when in reality, the break below the 200-day moving averages on the major exchanges was a major tipping point, signaling uncertainty and despair in markets stemming from unsustainable long-term economic conditions.
What began as a fraud, the sub-prime crisis, in which billions were swindled from the system and from individuals and from taxpayers (people not even engaged in the market), has evolved into a serious debate over the future of the United States of America and its Ponzi-like scheme of unfunded liabilities (mainly Social Security, Medicare and Medicade), debt-laced, unbalanced state and federal budgets and a national debt well into the trillions of dollars which will never be repaid.
Phase one was the meltdown of Autumn 2008 into 2009, with the requisite recovery bounce in the markets which gracefully lasted for over a year. Phase two is likely to last longer, move at a slower pace, but end up being even more severe. By the end of phase two, prior to another false bounce, most stock prices will lose half of their value or more as the panic and race for liquidity (cash) ensues. Figure that this phase will take us through the next election cycle, through the end of 2012, before any meaningful bounce, more than likely tied to false hope of a new "conservative" president and congress.
The end will come sometime within the following years - not to put too fine a point upon it - within the first two years of the next administration, when fear and panic have turned to rage and near-anarchy, when stocks will be viewed with contempt and the government (given there even is a government in control) disrespected and almost universally hated and blamed (rightfully) for the entire collapse of the economy.
In phase two, bottoms will form below the previous 2009 lows. The Dow will likely bottom out in the 4500-5000 range, the S&P around 450 and the NASDAQ in the range of 950 to 1100. After a brief sideways to upward move which will suck the last remaining dollars from those foolish enough to jump into the market while it is still collapsing, the major indices will approach levels not seen in 30 years or more. By 2014 the Dow Jones Industrials may well be hovering around 2-3000, the S&P 500 in the 300 range and the NASDAQ shattered beyond belief, possibly around 600-750. Stocks will lose almost all of their value, just as many did during the Great Depression of the 1930s, because, in reality, we are entering the most brutal stage of an even Greater Depression, one which, in all likelihood, will finish the Federal Reserve, fractional banking and fiat money.
Gold will probably reign, selling at unbelievable prices of over $4000 per ounce, as the last and only reliable store of value.
Of course, time being purely a relative factor in the grand economic experiment of the Keynesians, phases two and three could all occur in a much more compressed time frame. There will be days of maximum despair, of the Dow losing 1000 points in a day, aided by computer-generated program trading. There is no escaping the truth, nor the massive, unpayable debt the nation's leaders have promised. Life in America is about to undergo an incredible transformation, from a great nation to a poor one, and we have nobody to blame but the politicians we elected, for they have truly sold out the American people to bankers, frauds, liars and thieves.
Those who believe the next election will usher in some new form of direction or control are absolutely without a clue. The current office-holders will only be replaced by more-corrupt, less talented crooks, liars and clowns, who have neither any skill at governing nor any intention of restoring the country to the middle-class values upon which it was founded.
On the day, stocks were spanked right out of the gate, with the Dow down more than 200 points within minutes and the NASDAQ taking the brunt of the assault, off by more than 60 points in the early going. Stocks did not even attempt a rally at any point during the session, indicating broad distribution and a severe lack of buyers.
Bears took the day fully, and are just getting warmed up for the slaughter that is certain to occur over the next two months, as economic data will continue to demonstrate severe weakness in markets and stresses to the financial core. It is worth noting that US indices were not alone in their decimation. Asian and European bourses also were down by significant levels.
There was significant chart damage to the major averages. All closed well below their 200-day moving averages, a move widely expected only by honest economists with market understanding. The Dow fared better than the rest of the averages, as most of the representative stocks carry dividends, holding their values a little bit better than the majority of publicly-traded equities.
Dow 10,378.83, -265.42 (2.49%)
NASDAQ 2,208.63, -68.54 (3.01%)
S&P 500 1,089.47, -31.59 (2.82%)
NYSE Composite 6,902.72, -237.03 (3.32%)
Internals showed just how severe the damage was. Declining issues absolutely punished advancers, by a 6-to-1 tally, 5600-922. New lows clambered past new highs for the first time in well over a month, 216-210, a trend worth watching, which is likely to continue flashing bearish indications. Volume, though still at reduced levels, was much stronger today than on any of the previous two days of the week. There was enough selling strength to indicate more strain to come for the rest of the week and no end in sight, near-term.
NASDAQ Volume 2,114,243,500
NYSE Volume 4,857,608,500
On the commodity front, crude oil was crushed by the appreciation of the US dollar against most other currencies, especially the Euro, sending the front-end futures contracts down $2.23, to $78.02, the lowest level in two weeks. While most consider gold to be a safe haven, it was not an overwhelming favorite, gaining $1.30, to $1,197.50, though its positive finish was much more acceptable than what occurred in equities. The issue with gold is that it is, as a store of value, also inert. It has no usefulness other than as a place-holder. In times of unusual economic stress and especially in illiquid markets, there is a tendency for redemption. Gold gets liquidated just as quickly as other assets, as was seen during the 2008-09 phase of the crisis. It is, however, more resilient, and will probably, in the long run, prove to be more valued than any paper assets, like stocks or even cash.
The more-commoditized metal, silver, slipped 26 cents, to $17.89. One would expect silver to relinquish gains at a faster pace than gold, though it is likely more volatile as well.
It's not the beginning of the end, nor is it too late to make changes in one's asset allocations, from stocks and bonds into gold, cash, tools of trade and arable land. For those chasing value, like the millions stuck in mutual funds, pension funds and the like, there is nothing but pain ahead for years to come.
Many household names hit new 52-week lows, including our personal favorite, the discredited and illiquid Bank of America (BAC).
Tuesday, August 10, 2010
Boxed-in Fed Takes Baby Steps on QE2
To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.1 The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature.
Besides keeping interest rates at ZERO, that's the only important message from today's FOMC rate decision. Essentially, the Fed will continue to purchase Treasuries, as they have been, surreptitiously, for the past three to four months and above board, prior to that. They will roll over some of their mortgage (toxic) debt into shorter-dated and (supposedly) more stable Treasuries.
Nothing to see here. The Fed is essentially boxed-in, has been for some time and we are now Japan.
Stocks made an immediate jump - the Dow gained back 100 points - after the announcement, but it's nothing more than a knee-jerk reaction to meaningless story. The Fed can't do anything to improve the economy substantially except print and roll over debt.
Dow 10,644.25, -54.50 (0.51%)
NASDAQ 2,277.17, -28.52 (1.24%)
S&P 500 1,121.06, -6.73 (0.60%)
NYSE Composite 7,139.75, -48.55 (0.68%)
Declining issues smacked down advancers, 4829-1662, and new highs remained ahead of new lows, 342-118. Volume, the real story of the week, and the weak, remained at suppressed, almost laughable levels. More than ever it seems that the same stocks are just changing hands amongst the same people, with the Wall Street firms skimming at the margins.
NASDAQ Volume 1,906,714,625
NYSE Volume 4,524,408,000
Since the dollar was appreciably higher against the Euro and most other currencies, oil slipped, losing $1.23, to $80.25. Gold fell $4.50, to $1,196.20; silver dropped 8 cents, to $18.15, though both were marginally higher after the FOMC announcement.
The price/volume action in stocks is demonstrating a clearly-defined topping pattern, as mentioned yesterday. With no catalyst to move the economy forward, expectations for another corrective period are likely to be proven correct.
One other important note was a 0.9% drop in productivity in the 2nd quarter, along with a paltry gain of 0.2% in unit labor costs, more signs of a slowing economy and deflationary environment.
Monday, August 9, 2010
Topping Out as Devouring the Host
Sure, all of the major indices closed higher today.
They did it on abysmally-low volume, the third such low-volume day in a row.
The industrial machine, the engine of progress, the economic miracle once known as the United states economy is in the toilet.
Stocks should be at a peak, now, or very shortly, simply because the underlying conditions for not only growth, but even the plain maintenance of the basic infrastructure of the US system is unsustainable.
Congress has been rushed back from their "August recess" in order to vote on a $26 billion bailout for states, this, on top of last year's record federal assistance to the states in the stimulus bill. Not only is the private sector still reeling from the worst economic nightmare of all time - commonly known as the sub-prime meltdown - but the public sector also has been unable to escape its mighty grasp.
As I've probably mentioned too many times over the past three years, the USA is bankrupt and failing. That point has never been so obvious as right now, as local governments struggle to survive on a paucity of tax revenue, due to - big surprise - the failure of the unholy fascist union of government and big business to provide even the basic measure of economy to the citizens upon which it preys.
I am unable to put into words precisely how bad the economic condition in America has become. Much worse is the breakdown of social mores and values, which continue to deteriorate, seemingly, by the moment.
About a year ago, I declared the beginning of the post-governmental era, though apparently my inauguration was a bit premature. The government propped up the economy for most of the past 22 months since the breakdown of the financial system in Autumn of 2008. That gambit has ended. The federal government of the United States of America is completely off-the-rails (has been since somewhere in the first term of past president George W. Bush, probably about the time they began to lie us all into a war in Iraq), and cannot control the devastation - financial, social and political - which awaits.
The November elections are already a farcical affair, with people such as Rand Paul, Sharon Angle and Sarah Palin trolling for votes and outrage. Tea party candidates, or, those who espouse to be "endorsed" by the nebulous, imaginary "Tea Party" (there really is no such thing) are nothing more than the modern-day equivalent of Nazi Brown-shirts, thugs, impostors and paid political mercenaries. The upcoming elections are meaningless in terms of survival, the topic most on the minds of the vast majority of the American public (or at least it should be), and more focused on political will from the top down, a sick, twisted folly being played on the American people, complete with bread, circuses, dancing elephants, innuendo impersonating fact, celebrity masquerading as leadership.
As a nation, we are lost, we are doomed, we are dead.
That stocks would post gains in light of the conditions present puts on display positively some of the most-deranged market manipulations of all time. Shares of publicly-held US corporations are likely worth one-half to one-third of their stated market values because their future prospects (Remember that discounting mechanism we all so loved and cherished?) are skeptical, nightmarish, horrific... take your pick.
On Tuesday, the Fed will supposedly make some kind of announcement toward another round of quantitative easing, probably though some mechanism shrouded from view that will no doubt involve purchasing debt, specifically, US Treasury debt, though in reality, the program never actually stopped. What the Fed will announce will only serve to signal the banks and brokerages that the decimation of the dollar will continue and that they can commence with the further gutting of the wealth of America and Americans.
That I would like it to be something other than that goes without saying, but the cloth has been laid, the emperor - in this case, Ben Bernanke - will don the imagined suit and parade, like a clown, in front of the assembled world with nothing better to wear than a Zero interest rate policy which will at once equal both his IQ and his moral character. Tuesday, August 10, 2010, shall be a very sad day for Americans.
Dow 10,698.75, +45.19 (0.42%)
NASDAQ 2,305.69, +17.22 (0.75%)
S&P 500 1,127.79, +6.15 (0.55%)
NYSE Composite 7,188.30, +34.58 (0.48%)
On Monday, advancing issues far outweighed declining ones, 4498-1978. New highs overwhelmed new lows, 443-67. If it wasn't for the absurdly low volume of trading, one might believe we're on the cusp of a new bull market, which is precisely what the Wall Street hucksters wish you to believe, all along ready to hit the sell button and exit profitable positions built up over the past month, six months and since March of 2009. By the time the bear market has finished with what's available, all of those gains will be gone, forgotten, vanished. Valuations are so abnormally outside reality that a crash is nearly inevitable and has been for many months. It will occur, probably prior to the November elections, if only to better serve the interests of the so-called conservative faction, they being the paid lackeys of the ruling Wall Street elite.
NASDAQ Volume 1,642,519,125
NYSE Volume 3,631,964,750
Crude oil for September delivery was up another 78 cents on the day, to $81.48. Its relationship to the declining dollar is well-defined and will follow that same path of least resistance. If the dollar hegemony in oil pricing is ever broken, the world financial system will be in calamity for some period, the United States bearing the worst of it. Oil prices are going to rise for the near term, only because the US dollar is going to continue to fall. That's just the current case.
Gold lost $2.70, to settle neatly at everyone's favored price level, $1,200.70. It's a number not-too-threatening to the central bankers of the fiat-money nations, not too disliked by gold bugs, not subject to speculation nor implications of manipulation. It's about the only stable currency (oops, did I call gold "currency?") there is these days.
Silver continues to drift rudderless, losing 23 cents, to $18.23. It has lagged so far behind gold as to be almost untethered from its metallic counterpart.
The low volume price gains in the major markets are screaming sell signals on low volume. A topping out is underway in equities, but be not surprised if the averages continue a light climb until options expiration on August 20. After that, there is no bottom.
They did it on abysmally-low volume, the third such low-volume day in a row.
The industrial machine, the engine of progress, the economic miracle once known as the United states economy is in the toilet.
Stocks should be at a peak, now, or very shortly, simply because the underlying conditions for not only growth, but even the plain maintenance of the basic infrastructure of the US system is unsustainable.
Congress has been rushed back from their "August recess" in order to vote on a $26 billion bailout for states, this, on top of last year's record federal assistance to the states in the stimulus bill. Not only is the private sector still reeling from the worst economic nightmare of all time - commonly known as the sub-prime meltdown - but the public sector also has been unable to escape its mighty grasp.
As I've probably mentioned too many times over the past three years, the USA is bankrupt and failing. That point has never been so obvious as right now, as local governments struggle to survive on a paucity of tax revenue, due to - big surprise - the failure of the unholy fascist union of government and big business to provide even the basic measure of economy to the citizens upon which it preys.
I am unable to put into words precisely how bad the economic condition in America has become. Much worse is the breakdown of social mores and values, which continue to deteriorate, seemingly, by the moment.
About a year ago, I declared the beginning of the post-governmental era, though apparently my inauguration was a bit premature. The government propped up the economy for most of the past 22 months since the breakdown of the financial system in Autumn of 2008. That gambit has ended. The federal government of the United States of America is completely off-the-rails (has been since somewhere in the first term of past president George W. Bush, probably about the time they began to lie us all into a war in Iraq), and cannot control the devastation - financial, social and political - which awaits.
The November elections are already a farcical affair, with people such as Rand Paul, Sharon Angle and Sarah Palin trolling for votes and outrage. Tea party candidates, or, those who espouse to be "endorsed" by the nebulous, imaginary "Tea Party" (there really is no such thing) are nothing more than the modern-day equivalent of Nazi Brown-shirts, thugs, impostors and paid political mercenaries. The upcoming elections are meaningless in terms of survival, the topic most on the minds of the vast majority of the American public (or at least it should be), and more focused on political will from the top down, a sick, twisted folly being played on the American people, complete with bread, circuses, dancing elephants, innuendo impersonating fact, celebrity masquerading as leadership.
As a nation, we are lost, we are doomed, we are dead.
That stocks would post gains in light of the conditions present puts on display positively some of the most-deranged market manipulations of all time. Shares of publicly-held US corporations are likely worth one-half to one-third of their stated market values because their future prospects (Remember that discounting mechanism we all so loved and cherished?) are skeptical, nightmarish, horrific... take your pick.
On Tuesday, the Fed will supposedly make some kind of announcement toward another round of quantitative easing, probably though some mechanism shrouded from view that will no doubt involve purchasing debt, specifically, US Treasury debt, though in reality, the program never actually stopped. What the Fed will announce will only serve to signal the banks and brokerages that the decimation of the dollar will continue and that they can commence with the further gutting of the wealth of America and Americans.
That I would like it to be something other than that goes without saying, but the cloth has been laid, the emperor - in this case, Ben Bernanke - will don the imagined suit and parade, like a clown, in front of the assembled world with nothing better to wear than a Zero interest rate policy which will at once equal both his IQ and his moral character. Tuesday, August 10, 2010, shall be a very sad day for Americans.
Dow 10,698.75, +45.19 (0.42%)
NASDAQ 2,305.69, +17.22 (0.75%)
S&P 500 1,127.79, +6.15 (0.55%)
NYSE Composite 7,188.30, +34.58 (0.48%)
On Monday, advancing issues far outweighed declining ones, 4498-1978. New highs overwhelmed new lows, 443-67. If it wasn't for the absurdly low volume of trading, one might believe we're on the cusp of a new bull market, which is precisely what the Wall Street hucksters wish you to believe, all along ready to hit the sell button and exit profitable positions built up over the past month, six months and since March of 2009. By the time the bear market has finished with what's available, all of those gains will be gone, forgotten, vanished. Valuations are so abnormally outside reality that a crash is nearly inevitable and has been for many months. It will occur, probably prior to the November elections, if only to better serve the interests of the so-called conservative faction, they being the paid lackeys of the ruling Wall Street elite.
NASDAQ Volume 1,642,519,125
NYSE Volume 3,631,964,750
Crude oil for September delivery was up another 78 cents on the day, to $81.48. Its relationship to the declining dollar is well-defined and will follow that same path of least resistance. If the dollar hegemony in oil pricing is ever broken, the world financial system will be in calamity for some period, the United States bearing the worst of it. Oil prices are going to rise for the near term, only because the US dollar is going to continue to fall. That's just the current case.
Gold lost $2.70, to settle neatly at everyone's favored price level, $1,200.70. It's a number not-too-threatening to the central bankers of the fiat-money nations, not too disliked by gold bugs, not subject to speculation nor implications of manipulation. It's about the only stable currency (oops, did I call gold "currency?") there is these days.
Silver continues to drift rudderless, losing 23 cents, to $18.23. It has lagged so far behind gold as to be almost untethered from its metallic counterpart.
The low volume price gains in the major markets are screaming sell signals on low volume. A topping out is underway in equities, but be not surprised if the averages continue a light climb until options expiration on August 20. After that, there is no bottom.
Friday, August 6, 2010
The Stock Market is Broken
Today's trading supplied more than sufficient evidence that the major stock exchanges in the United States are broken.
Following the release of the most important data in a month's time, the monthly US non-farm payroll report, futures fell, and so did stocks at the open, and with good reason.
The Bureau of Labor Statistics reported a July payroll decline of 131,000, mostly due - according to the completely inept and inefficient government - to layoffs of of thousands of census workers, though private sector payrolls were said to have increased by some 70,000.
Overall, it was an inexcusable report, with private payrolls even failing to meet the needed capacity to keep up with population growth. In normal, orderly markets, the Dow Jones Industrials would have declined some 200 to 300 points, possibly more, but, being that Wall Street and Washington are so completely corrupt and in cahoots, stocks only fell during the session, closing with what cannot even be called "modest" losses. The minuscule size of today's declines are not in proper proportion with economic reality.
The maximum the Dow was down on the day was 160 points, with the other indices generally in line. Thanks to a late-day rally which began precisely an hour and fifteen minutes before the markets were to close, stocks ended nearly flat.
An exceptional article by Jim Sinclair sums up the current condition rather succinctly.
Dow 10,653.56, -21.42 (0.20%)
NASDAQ 2,288.47, -4.59 (0.20%)
S&P 500 1,121.64, -4.17 (0.37%)
NYSE Composite 7,153.72, -20.55 (0.29%)
Decliners beat advancing issues, 3590-2804. New highs ramped past new lows, 347-127. Volume was once again on the sorry side of pathetic. Surely there was a great deal of arbitrage within particular stocks, mostly the volume leaders, which is where the hedge funds frolic these days. The overall tone of the market is one in which a few players are actually still interested. It is flat and lacking dynamism and liquidity, due to fail, though apparently not on any genuine bad news.
NASDAQ Volume 1,886,263,625
NYSE Volume 4,467,197,500
The commodity space was much more entertaining today than the equity markets. Oil fell $1.30, to $80.70, in line with the decimation of the US dollar. Gold gained a tidy $6.20, finishing the work-week at $1,203.40. Silver added 15 cents, to $18.46. There seems to be no stopping Forex traders from hammering the dollar versus other currencies. The greenback was slaughtered by the Euro and the Yen, in a nearly honest appreciation of the employment situation in the US.
For investment purposes, stocks should be almost completely shunned at the juncture. With a Fed meeting next week, some are hoping for action, in the form of more quantitative easing, or at least the announcement of such, in response to the horrible economic conditions within the US borders, though none is likely, and, even if it is, will only provide more cover for the clowns in suits who occupy the Fed, Treasury and all three branches of the federal government.
The United States is slowly being bled to death by a thousand paper cuts applied by the government-approved banking/financial cartel.
Markets which cannot properly respond to critical economic data are rouge casinos, not orderly mechanisms for the trade of investment vehicles.
To further illustrate how the stock market is not in sync with reality, bonds tumbled like dominoes. The 10-year yield, already closing in on historic lows, fell 8 basis points to 2.82%. The five-year yield, which only a month ago was 1.78%, fell today to 1.50%. These Treasury bond prices truly reflect the economic condition of a country without support other than that which it commands from within. Fear is writ large in the bond prices. Unless there is a sudden change in political thinking and practicality, the economy will continue to languish.
Following the release of the most important data in a month's time, the monthly US non-farm payroll report, futures fell, and so did stocks at the open, and with good reason.
The Bureau of Labor Statistics reported a July payroll decline of 131,000, mostly due - according to the completely inept and inefficient government - to layoffs of of thousands of census workers, though private sector payrolls were said to have increased by some 70,000.
Overall, it was an inexcusable report, with private payrolls even failing to meet the needed capacity to keep up with population growth. In normal, orderly markets, the Dow Jones Industrials would have declined some 200 to 300 points, possibly more, but, being that Wall Street and Washington are so completely corrupt and in cahoots, stocks only fell during the session, closing with what cannot even be called "modest" losses. The minuscule size of today's declines are not in proper proportion with economic reality.
The maximum the Dow was down on the day was 160 points, with the other indices generally in line. Thanks to a late-day rally which began precisely an hour and fifteen minutes before the markets were to close, stocks ended nearly flat.
An exceptional article by Jim Sinclair sums up the current condition rather succinctly.
Dow 10,653.56, -21.42 (0.20%)
NASDAQ 2,288.47, -4.59 (0.20%)
S&P 500 1,121.64, -4.17 (0.37%)
NYSE Composite 7,153.72, -20.55 (0.29%)
Decliners beat advancing issues, 3590-2804. New highs ramped past new lows, 347-127. Volume was once again on the sorry side of pathetic. Surely there was a great deal of arbitrage within particular stocks, mostly the volume leaders, which is where the hedge funds frolic these days. The overall tone of the market is one in which a few players are actually still interested. It is flat and lacking dynamism and liquidity, due to fail, though apparently not on any genuine bad news.
NASDAQ Volume 1,886,263,625
NYSE Volume 4,467,197,500
The commodity space was much more entertaining today than the equity markets. Oil fell $1.30, to $80.70, in line with the decimation of the US dollar. Gold gained a tidy $6.20, finishing the work-week at $1,203.40. Silver added 15 cents, to $18.46. There seems to be no stopping Forex traders from hammering the dollar versus other currencies. The greenback was slaughtered by the Euro and the Yen, in a nearly honest appreciation of the employment situation in the US.
For investment purposes, stocks should be almost completely shunned at the juncture. With a Fed meeting next week, some are hoping for action, in the form of more quantitative easing, or at least the announcement of such, in response to the horrible economic conditions within the US borders, though none is likely, and, even if it is, will only provide more cover for the clowns in suits who occupy the Fed, Treasury and all three branches of the federal government.
The United States is slowly being bled to death by a thousand paper cuts applied by the government-approved banking/financial cartel.
Markets which cannot properly respond to critical economic data are rouge casinos, not orderly mechanisms for the trade of investment vehicles.
To further illustrate how the stock market is not in sync with reality, bonds tumbled like dominoes. The 10-year yield, already closing in on historic lows, fell 8 basis points to 2.82%. The five-year yield, which only a month ago was 1.78%, fell today to 1.50%. These Treasury bond prices truly reflect the economic condition of a country without support other than that which it commands from within. Fear is writ large in the bond prices. Unless there is a sudden change in political thinking and practicality, the economy will continue to languish.
Thursday, August 5, 2010
Dead Money Littering Wall Street as Suckers Flee
When you buy into a stock that refuses to go up in a meaningful way (Pfizer over the past five years is a good example) you have what is known among traders as "dead money." It's just sitting there doing nothing, not earning interest, just kind of lying around.
Now, that might be a good thing during a deflationary debacle like the one we're currently undertaking, so, maybe the dead money issue isn't all that earth-shattering a concept, after all, though, if you're used to the usual 15% returns that Wall Street hucksters promise, money lying around isn't your typical bag.
For the rest of us, those smart enough to stick our money in a coffee can or inside a wall safe, it's all well and good, so long as prices don't go ridiculously higher all of a sudden. There are a slew of misconceptions about money and its uses and usefulness, most of them aimed at baby-boomers with excess cash they're supposedly saving for a child's college, or a wedding or retirement, and most of those misconceptions usually involve keeping your money at work and not lazing around in a lounge chair in the back yard getting a tan.
However, based on the trading (in)activity the past few days, the concept of dead money might just be catching on. Stocks have just undergone a pretty significant rally - first, off the lows of March 2009, and more recently, about an 11% move back to where they now have settled, and nobody seems willing to sell, or to buy. Volume has dried up rather abruptly over the past two days, leaving open the question of whether Wall Street is even relevant anymore.
It seems that the majority of Americans who don't really have a whole lot of faith in the publicly-traded equity markets and have moved, over the past two years, into largely bond-related funds, are more than content with just keeping what they have instead of risking it in stocks. With the small investor clearly out of the market, that leaves mostly professionals and the very wealthy to do most of he trading on a day-to-day basis, but even they have become significantly more risk-averse of late, which means that the bulk of the trading has been left in the rather unstable hands of hedge fund managers and high-frequency traders.
Now, when these boys slow down there's really nothing left to keep markets bubbling, creating a sea of dead money, or more in the vernacular of economists, a liquidity crunch, which is precisely what we're staring at today.
It would seem, after the worst weekly unemployment claims figures since April came out this morning, and retail sales from a wide variety of chain stores showed poorly, that stocks would be sold off rather dramatically, and that seemed to be the case early on, but, buyers stepped in midday to soak up some of the losses, leaving the markets in a rather untidy state of affairs, with all indices down slightly, spending the entire session in the red, on volume that has to be one of the lightest five days of the year.
Truly pathetic, it was.
Dow 10,674.98, -5.45 (0.05%)
NASDAQ 2,293.06, -10.51 (0.46%)
S&P 500 1,125.81, -1.43 (0.13%)
NYSE Composite 7,174.27, -7.87 (0.11%)
Market internals showed a different side of the story as declining issues ran rampant over advancers, 3898-2509. New highs managed to maintain their sizable edge over new lows, 372-92.
NASDAQ Volume 1,704,054,000
NYSE Volume 4,089,902,750
In commodities, the September light crude oil futures contract fell by 48 cents, to $82.01. Gold gained $3.50, to finish at $1,197.20. Silver was up 4 cents, to $18.31.
With the July non-farm payroll report out tomorrow prior to the open, one would have expected a little more excitement, especially in light of the dreary economic data that seems to roll onto the street every day, but there was little movement overall, suggesting that these markets are suffering from a lack of interest bordering on apathy, due to a number of factors, but mostly, distrust, fear, uncertainty of the future and having been burned once too often.
It's the same kind of thing that happens with crooked card games. In the early stages, there a pigeons a'plenty. But, once word begins to get around and a few mouthy types get taken to the cleaners, the game dries up, and the cheaters end up playing penny-ante games amongst themselves, wiling away the hours, days and weeks.
We may be witnessing the initial stages of the final collapse of the Wall Street Ponzi scheme. They may have run out of suckers.
Now, that might be a good thing during a deflationary debacle like the one we're currently undertaking, so, maybe the dead money issue isn't all that earth-shattering a concept, after all, though, if you're used to the usual 15% returns that Wall Street hucksters promise, money lying around isn't your typical bag.
For the rest of us, those smart enough to stick our money in a coffee can or inside a wall safe, it's all well and good, so long as prices don't go ridiculously higher all of a sudden. There are a slew of misconceptions about money and its uses and usefulness, most of them aimed at baby-boomers with excess cash they're supposedly saving for a child's college, or a wedding or retirement, and most of those misconceptions usually involve keeping your money at work and not lazing around in a lounge chair in the back yard getting a tan.
However, based on the trading (in)activity the past few days, the concept of dead money might just be catching on. Stocks have just undergone a pretty significant rally - first, off the lows of March 2009, and more recently, about an 11% move back to where they now have settled, and nobody seems willing to sell, or to buy. Volume has dried up rather abruptly over the past two days, leaving open the question of whether Wall Street is even relevant anymore.
It seems that the majority of Americans who don't really have a whole lot of faith in the publicly-traded equity markets and have moved, over the past two years, into largely bond-related funds, are more than content with just keeping what they have instead of risking it in stocks. With the small investor clearly out of the market, that leaves mostly professionals and the very wealthy to do most of he trading on a day-to-day basis, but even they have become significantly more risk-averse of late, which means that the bulk of the trading has been left in the rather unstable hands of hedge fund managers and high-frequency traders.
Now, when these boys slow down there's really nothing left to keep markets bubbling, creating a sea of dead money, or more in the vernacular of economists, a liquidity crunch, which is precisely what we're staring at today.
It would seem, after the worst weekly unemployment claims figures since April came out this morning, and retail sales from a wide variety of chain stores showed poorly, that stocks would be sold off rather dramatically, and that seemed to be the case early on, but, buyers stepped in midday to soak up some of the losses, leaving the markets in a rather untidy state of affairs, with all indices down slightly, spending the entire session in the red, on volume that has to be one of the lightest five days of the year.
Truly pathetic, it was.
Dow 10,674.98, -5.45 (0.05%)
NASDAQ 2,293.06, -10.51 (0.46%)
S&P 500 1,125.81, -1.43 (0.13%)
NYSE Composite 7,174.27, -7.87 (0.11%)
Market internals showed a different side of the story as declining issues ran rampant over advancers, 3898-2509. New highs managed to maintain their sizable edge over new lows, 372-92.
NASDAQ Volume 1,704,054,000
NYSE Volume 4,089,902,750
In commodities, the September light crude oil futures contract fell by 48 cents, to $82.01. Gold gained $3.50, to finish at $1,197.20. Silver was up 4 cents, to $18.31.
With the July non-farm payroll report out tomorrow prior to the open, one would have expected a little more excitement, especially in light of the dreary economic data that seems to roll onto the street every day, but there was little movement overall, suggesting that these markets are suffering from a lack of interest bordering on apathy, due to a number of factors, but mostly, distrust, fear, uncertainty of the future and having been burned once too often.
It's the same kind of thing that happens with crooked card games. In the early stages, there a pigeons a'plenty. But, once word begins to get around and a few mouthy types get taken to the cleaners, the game dries up, and the cheaters end up playing penny-ante games amongst themselves, wiling away the hours, days and weeks.
We may be witnessing the initial stages of the final collapse of the Wall Street Ponzi scheme. They may have run out of suckers.
Wednesday, August 4, 2010
A Thousand Points of (False) Hope
Stocks on the major indices closed near their highs of the day, pushing the averages ahead for the 14th time in the last 21 sessions - about a month's worth.
Most of the upside movement since the 4th of July holiday has been on lighter-than-normal volume, and today was certainly no exception. Out of a universe of over 3000 stocks, the top five most active on the NYSE accounted for 12.5% of the volume, a skewing to the degree of magnitude of nearly 100 times normal, proving that when analysts say that most people trade the same stocks, they surely aren't lying about it.
Those five stocks - Citigroup (C), Bank of America (BAC), Motorola (MOT), Pfizer (PFE) and Ford (F) all trade for under $20 per share and have since Autumn of 2008, when the systemic financial collapse made everyone rethink valuation models. It's patently clear that investors have gotten stuck in a routine, especially in the case of Citi and BofA, two stocks which, under better-managed conditions would have been bankrupted and de-listed long ago. The pair of zombie banks consistently lead the most actives, as gamblers attempt to profit from fairly large percentage moves in what have become, essentially, penny stocks.
Another interesting side note on those top five is that all but Bank of America posted a gain, though Citigroup's was only a slim penny advance. BofA dropped by 14 cents, making the two most actively traded stocks the worst of the bunch. One can only speculate as to why so many trades occur on these two dogs, but there are, almost without a doubt, plenty of sellers, long-term holders who a quietly slipping their money out of them.
The advances over the past three days have pushed the Dow to a 1000-point gain over the past month, putting them right at (for Fibonacci fans) a 67% retracement of the 1500-point decline which commenced from mid-April to the first days of July.
At what appears to be a key inflection point, stocks face an uphill battle to surpass the April high of 12,200 on the Dow. Since the latest move has been fueled largely by excellent second quarter results from a wide swath of companies (notably, neither BAC nor C among them), the propellant seems to be missing for the final push, replaced by two key data points: Thursday's unemployment claims figures and Friday's July non-farm payroll report.
There were an equal amount of groans and cheers this morning when ADP released its own private payroll report for July, showing 42,000 new jobs being created during the month. Since the report does not include government employment, it serves as a proxy for Friday's figures, which are likely to come in only slightly on the positive side or even negative, due to layoffs from expired census employment. Thursday morning's unemployment data will provide another clue.
It's probably safe to say, barring any outsize surprise on the upside, that stocks are ready for a reversal after a month in a fantasy zone, though those of the bearish camp will contend that the stock market does not represent the US economy, and thus will continue to climb on their own.
There is some degree of truth to that argument, but if US-based companies refuse to hire US citizens, as they have for the past two years (ad for some, much longer than that), there will be bottom-line damage eventually, unless the companies in question are doing 75% or more of their business outside the USA, in which case they should be listed on another, non-US exchange. The US market is still the largest and most important, and people without jobs cannot continue to buy good and services at a steadily-growing rate. Of course, should congress deem that unemployment benefits should continue indefinitely, beyond the currently-absurd 99 weeks, companies might as well just lay off all US employees and allow the government to pick up the tab.
ISM services index rose from 53.8 in June, to 54.3 in July, eliciting another big whoop from perma-bulls, various tea-partiers and clueless analysts, who seem to be everywhere at once this summer.
Dow 10,680.43, +44.05 (0.41%)
NASDAQ 2,303.57, +20.05 (0.88%)
S&P 500 1,127.24, +6.78 (0.61%)
NYSE Composite 7,182.14, +35.15 (0.49%)
Advancing issues dominated decliners on the day, 4577-1880; new highs soared past new lows, 408-68; but volume, as previously mentioned, was the real story, well below normal levels and embarrassingly below what used to serve as average prior to the 2008 meltdown.
NASDAQ Volume 1,881,489,125
NYSE Volume 4,293,061,500
Commodity traders seemed unable to gain traction. Oil paused, dropping 8 cents, to $82.47. Gold gained $8.50, to $1,193.70, though silver did not follow on, losing 14 cents to $18.26.
With new economic data on the horizon, there appears to be no new catalyst with which to lift equities near-term, and longer-term prospects, heading into 2011, also seem pinned to dim, or even false, hopes.
Most of the upside movement since the 4th of July holiday has been on lighter-than-normal volume, and today was certainly no exception. Out of a universe of over 3000 stocks, the top five most active on the NYSE accounted for 12.5% of the volume, a skewing to the degree of magnitude of nearly 100 times normal, proving that when analysts say that most people trade the same stocks, they surely aren't lying about it.
Those five stocks - Citigroup (C), Bank of America (BAC), Motorola (MOT), Pfizer (PFE) and Ford (F) all trade for under $20 per share and have since Autumn of 2008, when the systemic financial collapse made everyone rethink valuation models. It's patently clear that investors have gotten stuck in a routine, especially in the case of Citi and BofA, two stocks which, under better-managed conditions would have been bankrupted and de-listed long ago. The pair of zombie banks consistently lead the most actives, as gamblers attempt to profit from fairly large percentage moves in what have become, essentially, penny stocks.
Another interesting side note on those top five is that all but Bank of America posted a gain, though Citigroup's was only a slim penny advance. BofA dropped by 14 cents, making the two most actively traded stocks the worst of the bunch. One can only speculate as to why so many trades occur on these two dogs, but there are, almost without a doubt, plenty of sellers, long-term holders who a quietly slipping their money out of them.
The advances over the past three days have pushed the Dow to a 1000-point gain over the past month, putting them right at (for Fibonacci fans) a 67% retracement of the 1500-point decline which commenced from mid-April to the first days of July.
At what appears to be a key inflection point, stocks face an uphill battle to surpass the April high of 12,200 on the Dow. Since the latest move has been fueled largely by excellent second quarter results from a wide swath of companies (notably, neither BAC nor C among them), the propellant seems to be missing for the final push, replaced by two key data points: Thursday's unemployment claims figures and Friday's July non-farm payroll report.
There were an equal amount of groans and cheers this morning when ADP released its own private payroll report for July, showing 42,000 new jobs being created during the month. Since the report does not include government employment, it serves as a proxy for Friday's figures, which are likely to come in only slightly on the positive side or even negative, due to layoffs from expired census employment. Thursday morning's unemployment data will provide another clue.
It's probably safe to say, barring any outsize surprise on the upside, that stocks are ready for a reversal after a month in a fantasy zone, though those of the bearish camp will contend that the stock market does not represent the US economy, and thus will continue to climb on their own.
There is some degree of truth to that argument, but if US-based companies refuse to hire US citizens, as they have for the past two years (ad for some, much longer than that), there will be bottom-line damage eventually, unless the companies in question are doing 75% or more of their business outside the USA, in which case they should be listed on another, non-US exchange. The US market is still the largest and most important, and people without jobs cannot continue to buy good and services at a steadily-growing rate. Of course, should congress deem that unemployment benefits should continue indefinitely, beyond the currently-absurd 99 weeks, companies might as well just lay off all US employees and allow the government to pick up the tab.
ISM services index rose from 53.8 in June, to 54.3 in July, eliciting another big whoop from perma-bulls, various tea-partiers and clueless analysts, who seem to be everywhere at once this summer.
Dow 10,680.43, +44.05 (0.41%)
NASDAQ 2,303.57, +20.05 (0.88%)
S&P 500 1,127.24, +6.78 (0.61%)
NYSE Composite 7,182.14, +35.15 (0.49%)
Advancing issues dominated decliners on the day, 4577-1880; new highs soared past new lows, 408-68; but volume, as previously mentioned, was the real story, well below normal levels and embarrassingly below what used to serve as average prior to the 2008 meltdown.
NASDAQ Volume 1,881,489,125
NYSE Volume 4,293,061,500
Commodity traders seemed unable to gain traction. Oil paused, dropping 8 cents, to $82.47. Gold gained $8.50, to $1,193.70, though silver did not follow on, losing 14 cents to $18.26.
With new economic data on the horizon, there appears to be no new catalyst with which to lift equities near-term, and longer-term prospects, heading into 2011, also seem pinned to dim, or even false, hopes.
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