It seems like every day there is a different story coming out of Europe concerning the debts of various nations and how the ECB, EIB, EFSF or any of a multitude of alphabet-soup acronyms react and intend to dispose of or attempt to solve the problem of the day. Today was no different as a late-session story from the Financial Times killed off a perfectly good short-covering, end of month window dressing rally inspired by absolutely nothing.
Stocks had been rolling along after a massive gap-up at the open, with the Dow ahead by as many as 325 points, but everything did an abrupt about-face when news erupted from Europe around 3:00 pm EDT over a rift between the nations aligned to bail out Greece - again.
According to the Wall Street Journal's story:
Stocks pared gains in the final trading hour after the Financial Times reported a split has opened in the eurozone over the terms of Greece's second bailout package. As many as seven of the bloc's 17 members are arguing for private creditors to swallow a bigger writedown on their Greek bond holdings, the FT said, citing senior European officials.
That was enough to finish off all the naked enthusiasm for the day and send stocks reeling into reverse. Though the averages finished the day with healthy gains, the froth at the top - and middle - were blown off by one story concerning something everybody already knows is a financial disaster, the continuing struggle over whether Greece should be allowed to fail or, by keeping it afloat, potentially take down the entire EU and maybe the rest of the global economy with it. The central banking powers and politicians around the globe are about at wit's end over the crisis in Europe, and are seemingly capable of saying or doing just about anything to stave off the eventual collapse of the Euro as a viable currency.
Sadly, for them and for the rest of us, eventualities do occur despite the best efforts of bright people to change the course of reality. It's so obvious to everyone now that Greece has to go, and soon, and they will take down untold numbers of European-based banks and spread the default contagion far and wide. Welcome to the 2008 redux.
For those who make a living trading, this environment is conducive to massive profits if one is nimble, smart and engaged, though at the end of the day all the swaps, hedges and protection aren't going to matter one whit when the financial tsunami crests upon first Greece's pristine shores and continues along the Mediterranean to Italy, Spain and Portugal. Once it races through the Straits of Gibraltar, all nations will be at risk, though the most isolated may be the best-insured. Countries out of the way, like Russia, India, Indonesia and Canada, may be spared the brunt of the blows, though general commerce will be affected globally.
It's coming. Everybody knows it. Most are in denial. That's how we get miracle rallies out of the blue and smashing declines on real news.
What to watch for are waves of large bankruptcies, like that of Saab, recently, sure to be followed by smaller suppliers and next by maybe a Chrysler or General Motors, which has traded below its IPO price for a solid six months after being bailout out by the US taxpayer. Nobody is buying new cars, and they're especially steering clear of GM (aka Government Motors) models. We are in the final stages of financial collapse, the first wave coming in 2008 and truncated by massive capital injections by the Federal Reserve, other central banks and governments from Paris to Beijing.
The financial paradigm of debt-issued money being created out of thin air, fractional reserve banking and crony capitalism has been broken and will soon find itself in complete and utter chaos. Events such as today's turnaround on Wall Street serve as apt reminders that the system is broken beyond human repair. It will take an act of God or an invasion from outer space to fix the mess and neither of those potentialities are on the horizon.
Adding insult to injury, analyst Meredith Whitney cut her third quarter earnings estimates on Goldman Sachs and Morgan Stanley late in the day. Whitney, a highly-respected banking analyst, cut Goldman Sachs (GS) from 3.39 per share to a mere 31 cents, a 90% haircut. Morgan Stanley (MS) was cut from 53 cents to 28, so it would be best to be prepared for a third quarter earnings bloodbath, not only for banking stocks, but for a host of other well-known names. Results from the previous quarter and year-ago will be hard to match for many firms, with the 4th quarter looking even more devilish.
Dow 11,190.69, +146.83 (1.33%)
NASDAQ 2,546.83, +30.14 (1.20%)
S&P 500 1,175.38, +12.43 (1.07%)
NYSE Composite 7,043.12, +102.31 (1.47%)
NASDAQ Volume 2,109,385,500
NYSE Volume 5,515,045,000
Combined NYSE & NASDAQ Advance - Decline: 5195-1451
Combined NYSE & NASDAQ New highs - New lows: 37-102
WTI crude oil: 84.45, +4.21
Gold: 1,652.50, +57.70
Silver: 31.54, +1.56
Posts
No comments:
Post a Comment