Showing posts with label General Motors. Show all posts
Showing posts with label General Motors. Show all posts

Tuesday, April 28, 2020

Bailout Nation: Careening Toward the Zombie Apocalypse

Beneath the superficial aspects of the coronavirus - the hospitals, the deaths, media deflection, Presidential dithering, lockdowns, social distancing, and the state-by-state re-openings - there exists a subculture of cash, credit, debt, default, and the eventuality of a global depression.

The question is not whether there's going to be a recession - there will be, without a doubt - it's how long the depression will last and how deeply affected will be various segments of the economies of nations and those nations themselves.

This is an extremely complex scenario that will not be evenly distributed. Some people will prosper while others decline. Some will go broke. Others will simply give up and die. It's an absolute certainty that there will be more losers than winners, many many more. Knowing that, the federal government, in conjunction with the Federal Reserve, has set about the process of bailing out everybody, or, nearly everybody. The problem is, they've not gone about the process with much foresight, they have no comprehensive plan, and the result has been a sloppy patchwork of band-aids, unkept promises, imbalances, and knee-jerk, short-term remedies.

Wall Street got their money right away, small business got shafted, twice, wage-earners, especially those in low-wage jobs, got a bonanza to the extent that the $600 extra unemployment benefit doled out by the Fed has in some cases doubled the take home pay of a huge chunk of the workforce. Anybody making minimum wage or anything less than $15 per hour has experienced a tangible benefit. The unfortunate part of this is that the additional unemployment benefit vanishes in about four months, or, for most people, sometime during August. Whether the federal government will step in again at that point to provide more relief is, at this juncture, a speculation.

Meanwhile, most seniors receiving Social Security or Railroad Retirement benefits, haven't seen a dime, despite the late March pledge from Treasury Secretary Steven Mnuchin that they would have their money ($1200 per person plus $500 for each qualifying dependent) within two weeks. It's going on six weeks and the money still hasn't arrived. The latest promise is that direct deposits would be made this week. Don't count on it. Mnuchin has proven that his priorities lie mainly with big business and Wall Street banks, not with the people who matter, the citizens, the taxpayers, the consumers. He's effectively relayed the message to seniors that they don't matter at all.

All the time, but especially during times of crisis, people should be judged by their actions, not their words. If there's a judgement to be made on Steven Mnuchin, he would be deemed an awesome character by the one-percenters and upper crust, and a outright liar and scoundrel by just about everybody over the age of 62.

The problems with the quick-fixes that have come out of the Fed and the federal government are multiple. They're temporary. They solve nothing. They're largely unfair. They won't work long term. Not for the stock market, not for the banks, not for states and cities, not for pension plans, and especially for the backbone of society, small businesses and the people they employ, or, rather, employed, because most small businesses in the United States are dead men walking. If they haven't already closed their doors forever, never to return, they're on the verge of collapse, as is the rest of the country, despite nobody in government or the media actually leveling with the people.

Next up on the list of bailouts are cities, counties and states, which have experienced massive losses to their revenue base and will see those losses multiply over time. They are coming to the federal government with outstretched arms, awaiting their turn at the feeding trough of unlimited capital. A business owner who doesn't pay property taxes because his business has been shut down for a month or six weeks or longer is one thing. The loss of sales tax revenue is another, and one that will continue long into the future. Again, the feds can only do so much. It's up to the local and state managers of their various governmental units to take action, and sooner rather than later.

Cutting back on services and employment should have been happening in March and April, but it hasn't. Teachers get paid. Cops and firemen get paid. Sanitation workers get paid. Clerks and paper shufflers get paid. All the while the cities and counties are bleeding revenue. Their collapse is imminent and they have only themselves to blame for decades of living high on the hog that is the taxpayer, without regard to emergencies, without planning for even a slowdown from the stock buyback, free money largesse of the past decade. Their demise, along with the platinum health care plans and pension, are at extremely high risk of being insolvent and overdue for a significant haircut. They're counting on the federal government to bail them out, but at issue is which ones get bailed out first and for how much? Will red states get more than blue states? Will big cities get a better piece of the pie than rural communities?

It's likely, actually, it's not only probable, but a near-certainty that any government bailout of cities, counties, and states will be as uneven as the handling of the first few rounds of government aid to private business and citizens. It's going to be a disaster of magnificent proportion because not only will the federal government take too long to deliver, they'll almost certainly deliver less than is necessary, and the help will be only temporary. There is no good way out. Like the companies who are being propped up by the Fed via purchasing of their commercial paper, the Fed can't stop at buying up muni bonds; it has to come in with actual cash to keep the lights on in every city, town, and village across America.

In the end, everything goes dark. While trying desperately to not sound like a broken record, Wall Street firms will fail, banks will fail, governments will fail, companies will die, people will die, but not until there's a massive outbreak of civil unrest, the first springs of that having already been seen in the "reopen" protests that have flourished at state capitols and elsewhere around the country.

As the coronavirus has proven to be less of a threat to human existence than previously thought, the feds and state governments continue to respond as though it is a return of the Bubonic Plague or Spanish Flu. It's not, and the response has been a massive overreach that has destroyed the economy and people's already wavering confidence in leadership and government. It has only just begun and the levels of protest, unruliness, incivility, lawlessness, and violence will only increase over time. When the extra unemployment insurance runs out in August and there are still 12-15 million people out of work, the cat will have come out of the bag, and it will be not a tame household kitty, but a hungry, untamed lion, set out to ravage the nearest prey, and that prey will be neighborhoods, local governments, and the unprotected. The resultant destruction to the social fabric will be devastatingly real and not just close to home, at your home or your neighbor's home or in it.

Not to put too fine a point on it, but it isn't COVID-19 that is screwing the country and the world, but the government reaction to it. As has already been made evident, government is not only not the solution, it is the problem itself.

Presently, the Fed has managed to keep the stock markets from imploding and possibly from shutting down altogether. They've actually managed to boost prices for many companies that should be heading to the bankruptcy courts rather than to the Fed's liquidity spigot. Since April 8, all the major indices have traded in a well-defined range, an overt signal that the Fed is in charge, keeping the markets stable while the VIX remains elevated. It's a manipulation and a thorough destruction of capital markets. Stocks and bonds are effectively controlled by government now, and thus, are DOA.

While stocks were reaching for yet another giddy day in their make-believe land of rich and plenty, General Motors (GM), at one time a bastion of industry and a beacon of capitalism, a company the taxpayers bailed out a decade ago, announced on Monday that it was suspending its 38 cents quarterly dividend, halting the buyback of its own stock and bolstering its lines of credit. Gee, thanks, GM. Please turn the lights out before you close the door. GM should have been allowed to fail in 2008. Now they will just burn more cash, screw their investors and permanently dis-employ hundreds of thousands of workers in the auto business and its suppliers.

GM has about 164,000 full time employees including Chairwoman of the Board and CEO Mary Barra, whose pay last year was $7.36 million, not including stock options and other bonuses and benefits. Not only has she managed to completely decimate the company's balance sheet, but she's managed to raid the company coffers to her benefit. The company is likely to survive for a few more years, but, after bankruptcy proceedings, within four or five years, the number of full time employees will be zero, and Ms. Barra and all her hourly and salaried workers can compliment her on the bang-up job she'd done throughout the coronavirus crisis, culminating in the wholesale looting and destruction of the company.

With that news as a backdrop, GM tacked on half a point Monday, closing at 22.45 a share. The company publicly disclosed assets of 228 billion and liabilities of 182 billion. With the expectation that the assets are overvalued and liabilities on the rise, it won't be long until GM is permanently upside down. Give it six months before all hell breaks loose.

GM is not alone. Most companies are going to slash dividends, workers, expenses and tap into their lines of credit as the quarterly reports flow this month and next, but Wall Street seems to like the idea, rallying on Monday with futures ramping higher into Tuesday's opening.

This is what a dysfunctional market looks like.

On the day, treasuries acted as though the recovery had already begun, with the 30-year upping its yield from 1.17 to 1.25%, the 10-year note up seven basis points to 0.67% and the curve steepening to 114 basis points. When the curve falls to below 100 basis points (one percent), that will be the signal that the crisis is deepening.

Oil got whacked again on Monday, WTI crude dropping from its Friday close of $16.94 per barrel to $10.76. Gold and silver were up early down late on futures trading, but that doesn't matter since physical is still elusive and premiums are through the roof, up to $135 on an ounce of gold, as much as $7.00 or more on silver.

Dominoes are falling. Get out of the way. Within six months, there will be more zombie companies, zombie banks, zombie governments and zombie people, all kept alive by the Federal Reserve. Unlike vampires, which can be killed with silver bullets or stakes to the heart, the only way to kill zombies is to blow off their heads.

Ready, aim...

At the Close, Monday, April 27, 2020:
Dow: 24,133.78, +358.51 (+1.51%)
NASDAQ: 8,730.16, +95.64 (+1.11%)
S&P 500: 2,878.48, +41.74 (+1.47%)
NYSE: 11,264.84, +246.94 (+2.24%)

Wednesday, October 30, 2019

Stocks Slip Amid Mixed Earnings, Awaiting FOMC Interest Rate Decision

Stocks took a breather the day after the S&P 500 set a new all-time closing high, slumping slightly on various earnings results that were a mixed bag.

Google parent, Alphabet (GOOG), started the dour mood after the close on Monday by missing EPS estimates by a wide margin. General Motors (GM) was another big name that fell short, reporting $1.20 per share against analyst estimates for $1.31. There were plenty of smaller firms reporting solid or neutral results for the third quarter, but the large caps dominated the news flow.

Drops on the main indices were contained, not unusual following a healthy upsurge. Waiting upon the Federal Reserve's FOMC policy decision announcement Wednesday afternoon (2.00 pm ET), trading was muted but not depressing.

When the market opens Wednesday, earnings reports will already have been released for some other big names, including Yum! Brands (YUM), General Electric (GE), and Sotheby's (BID).

Apple (AAPL), Starbucks (SBUX), and Facebook (FB) report after the close.

In between earnings releases and calls, the Fed will provide most of the excitement on Wednesday.

At the Close, Tuesday, October 29, 2019:
Dow Jones Industrial Average: 27,071.42, -19.30 (-0.07%)
NASDAQ: 8,276.85, -49.13 (-0.59%)
S&P 500: 3,036.89, -2.53 (-0.08%)
NYSE Composite: 13,209.63, +23.20 (+0.18%)

Tuesday, November 27, 2018

GM To Lay Off 14,000; Stocks Stumble To Gains

With news that General Motors (GM) would lay off 14,000 workers and shut down five plants, the mood on Wall Street at the opening bell was more than a little bit sour. It was just the kind of news that the market didn't want to hear, especially after some smashing numbers from Black Friday retail sales and even more good news from Cyber Monday's online commerce.

The Dow sank more than 200 points in the first half hour of trading, but from there took the path of least resistance, to the upside, extending Monday's rally with a little hiccup from some morning indigestion. While the Dow posted a fair gain, the other indices didn't do much, with the NASDAQ and NYSE Composite barely making it above unchanged. The S&P shook out some shorts for a third of a percent win.

Everything else was pretty ugly. Oil posted a minor gain, though there are few in the real world who believe the selloff in crude - as with stocks - is over. Precious metals were slammed close to recent lows and seem to have no ballast, the past three months nothing but a rollover and consolidation with a focus to the negative. The metals can't break to the upside as long as every other asset class is struggling; the current logic dictating that stocks must regain a positive footing and absent that, nothing else matters.

Today's trade was mostly noise. Nothing really moved the meter and it was a little bit of a surprise that stocks rallied as well as they did. Stocks remain week and investors weary. While that's a solid formula for further declines, the day-trading flogs and HFTs have managed to keep stocks from completely folding up their tents. That, and a healthy dose of holiday cheer should keep things stabilized... until they're not.

Dow Jones Industrial Average November Scorecard:

Date Close Gain/Loss Cum. G/L
11/1/18 25,380.74 +264.98 +264.98
11/2/18 25,270.83 -109.91 +155.07
11/5/18 25,461.70 +190.87 +345.94
11/6/18 25,635.01 +173.31 +519.25
11/7/18 26,180.30 +545.29 +1064.54
11/8/18 26,191.22 +10.92 +1075.46
11/9/18 25,989.30 -201.92 +873.54
11/12/18 25,387.18 -602.12 +271.42
11/13/18 25,286.49 -100.69 +170.27
11/14/18 25,080.50 -205.99 -35.72
11/15/18 25,289.27 +208.77 +173.05
11/16/18 25,413.22 +123.95 +297.00
11/19/18 25,017.44 -395.78 -98.78
11/20/18 24,465.64 -551.80 -650.58
11/21/18 24,464.69 -0.95 -651.53
11/23/18 24,285.95 -178.74 -830.27
11/26/18 24,640.24 +354.29 -475.98
11/27/18 24,748.73 +108.49 -367.49

At the Close, Tuesday, November 27, 2018:
Dow Jones Industrial Average: 24,748.73, +108.49 (+0.44%)
NASDAQ: 7,082.70, +0.85 (+0.01%)
S&P 500: 2,682.20, +8.75 (+0.33%)
NYSE Composite: 12,188.06, +6.46 (+0.05%)

Thursday, June 21, 2018

Dow Losing Streak Reaches Seven Days; Walgreens To Replace GE In Dow Index

No analysis needed to spot the recurring pattern of trading prominent on Wednesday. The Dow suffered its seventh straight losing session while the NASDAQ powered to new highs, mostly on the backs of the beloved tech stocks known as the FAANGs.

In the news, Walgreens Boots Alliance (WBA) is set to replace General Electric (GE) in the Dow Jones Industrial Average, effective prior to the open of trading on June 26. Walgreens is trading for 64.61, down from its all-time high of 86.55, June of 2015.

General Electric, which has been under pressure since near the end of last year, has lost nearly two thirds of its value in the past eight months. Shares have fallen from 31.60 per share in October, 2016, to the current per share price of 12.96. The company has lost over 80 percent of its value since 2000.

General Electric was an original member of the Dow when it was formed by Charles Dow in 1896 and a continuous member since 1907.

Since Walgreens is trading at five times the value of GE, an adjustment will be made to the Dow divisor, lest the index experience a rapid upside explosion due to the change. This is exactly how the Dow works, replacing weaker companies with stronger ones.

The is the 15th change in the structure of the Dow since 2004. Some of the companies formerly a part of the index but since removed in the 21st century include Eastman Kodak, International Paper, AT&T, AIG, Citigroup, Bank of America, General Motors, and Honeywell.

Dow Jones Industrial Average June Scorecard:

Date Close Gain/Loss Cum. G/L
6/1/18 24,635.21 +219.37 +219.37
6/4/18 24,813.69 +178.48 +397.85
6/5/18 24,799.98 -13.71 +384.14
6/6/18 25,146.39 +346.41 +730.55
6/7/18 25,241.41 +95.02 +825.57
6/8/18 25,316.53 +75.12 +900.69
6/11/18 25,322.31 +5.78 +906.47
6/12/18 25,320.73 -1.58 +904.89
6/13/18 25,201.20 -119.53 +785.36
6/14/18 25,175.31 -25.89 +759.47
6/15/18 25,090.48 -84.83 +674.64
6/18/18 24,987.47 -103.01 +571.63
6/19/18 24,700.21 -287.26 +284.37
6/20/18 24,657.80 -42.41 +241.96

At the Close, Wednesday, June 20, 2018:
Dow Jones Industrial Average: 24,657.80, -42.41 (-0.17%)
NASDAQ: 7,781.51, +55.93 (+0.72%)
S&P 500: 2,767.32, +4.73 (+0.17%)
NYSE Composite: 12,648.74, +9.76 (+0.08%)

Friday, November 19, 2010

Dull End to a Wild Fortnight

At the end of a wild two weeks, everybody needed a break and they got one, in one of the slowest trading days in some time. News flow was also minimal.

In sync with the rest of the market, General Motors (GM), on its second day of trading as a new, reformed entity, fell almost back to its IPO price, hitting 33.11 at just about 10:00 am. The stock and the rest of the market (Dow was down 62 points) took a sudden turn and churned to slight, positive gains by the sessions end.

Overall, the major indices have barely moved since the mid-term elections. The Fed's incessant currency devaluation efforts have also, thus far been for naught.

Dow 11,203.55, +22.32 (0.20%)
NASDAQ 2,518.12, +3.72 (0.15%)
S&P 500 1,199.73, +3.04 (0.25%)
NYSE Composite 7,641.08, +21.14 (0.28%)
NASDAQ Volume 1,878,265,250
NYSE Volume 3,921,869,500

Advancers finished well ahead of losers, 3546-2632. There were 279 new highs and 73 new lows. Volume was extremely light.

Oil was flat, at $81.85. Silver last printed 27.35, +0.36. Gold spot closed at $1354.10, up 60 cents.

Rinse, repeat, ponder the future. Ireland remains in talks with the EC, ECB and IMF. They're getting the "full monty" from the financiers, if you will.

Thursday, November 18, 2010

Market Motors Ahead on GM IPO

The entire trading day was a well-orchestrated event staged by the power brokers of Wall Street, the government and the shills on CNBC, designed exclusively to give the pet project of the bailout bunch, General Motors, a bright and cheery IPO send-off.

Shares of GM's rebirth IPO (initial public offering - somewhat of an oxymoron in this case) priced the previous day at $33 and opened with immediate upticks shortly after the general markets had commenced trading. That it would get a positive set up was assured by a gargantuan ramp-up in the futures, ostensibly on news that Ireland was veering toward accepting a bailout from either the EU or the IMF or a combination of both. Only in these wacky times can the fact that a nation is being saved from ruin by the very same bankers who ruined it foment a powerful rally, but, that's the world in which we now live.

The set-up got GM off to a nice start with the rest of he market despite fears that some traders would "flip" the stock, and surely some did. Shares of GM hit a high of 35.99 shortly after the open and retreated the rest of the day, hitting a low of 33.89 before settling at 34.19 at the close for a gain of 3.61%, no big deal.

The Fed pumped more money in the direction of the primary dealers. This is a permanent fixture now as the Fed has already set down a timetable for a daily POMO through December 9, with the exception of the Wednesday before and the Friday after Thanksgiving (next week).

Another interesting note was news that Warren Buffet was to receive the Medal of Freedom, just a day after practically falling all over himself in praise of the government in his NY Times op-ed. At least he'll be in equally-suspect company. German Chancellor Angela Merkel and former US President George H.W. Bush are among other recipients named by President Obama.

From this we can only surmise that the level of greed, corruption and naked narcissism has finally reached critical mass amongst the elitists.

Dow 11,181.23, +173.35 (1.57%)
NASDAQ 2,514.40, +38.39 (1.55%)
S&P 500 1,196.69, +18.10 (1.54%)
NYSE Composite 7,619.94, +131.18 (1.75%)
NASDAQ Volume 2,083,305,250.00
NYSE Volume 5,373,779,000

Advancers trounced decliners, 5093-1419; new highs surpassed new lows for the second straight session, 299-59, but volume, up to 20% of which on the NYSE was attributed to trades on GM, was weak.

Commodities also ramped up. The front end of the crude oil futures gained $1.41, to $81.85. Gold picked up $16.10, to $1,353.00, while silver rose more than 5%, up by $1.32, to $26.83.

Unemployment claims were little changed from the previous week and October stock options expire tomorrow. The latest word from the continent is that Irish leaders are still resistant to a bailout, though the pressure is building for them to take the money and plunge the country into an even worse situation, with bills and interest owing to the IMF with no hope of ever paying its way out. This same thing has happened before, in Argentina and other South American countries. The usual outcome is the rape of the nation's wealth to the detriment of the populace.

Erin go Bragh, indeed.

Tuesday, June 2, 2009

The Incredible Levitation Stock Market Routine

Stocks managed another day slightly to the upside on Tuesday, the mood tempered somewhat as there wasn't another world-record bankruptcy to celebrate as on Monday. Without a General Motors going bust, the fat cats must have little to do, trying to keep the mood cheery and uplifting.

Despite the paucity of news - though pending home sales in April were up a reported 6.7% - investors still haven't gotten the idea to lock in profits, expecting the rebound and recovery to continue seemingly forever.

Dow 8,740.87, +19.43 (0.22%)
NASDAQ 1,836.80, +8.12 (0.44%)
S&P 500 944.74, +1.87 (0.20%)
NYSE Composite 6,182.87, +13.80 (0.22%)

Despite the smallish gains on the indices, the positive tone was notable, with advancing issues defeating decliners, 3764-2648. New highs recorded their second straight victory over new lows, 99-81, though it will take more than just a few instances for this to become a trend, and the betting - in this quarter at least - is against it. Volume was solid, roughly in Monday's range, and thus, unimportant.

NYSE Volume 6,945,081,000
NASDAQ Volume 2,406,962,750

Crude oil took a bit of a breather - or, rather, the pumping speculators did - losing 3 cents to $68.55. Gold gained, adding $4.40, to $984.40, in its inexorable push back above $1000. Silver continues to post impressive gains, adding another 22 cents per ounce, to $15.96. The silver rally is real, has legs and should continue unabated beyond $17 in short order.

As for stocks, well, they keep going up, too, but there are many reasons not to like them, the main one being that everyone has grown so complacent in recent weeks, setting up the potential for a swift and violent decline.

Monday, June 1, 2009

The Strangest Rally of All Time

It would be difficult, if not impossible, to describe the absurdity of the current rally in equities in terms that would do it justice. Mere mortals stand in awe of the magnificence, the enormity, and the one-sidedness of the US stock markets since March 9, 2009, until today... and probably beyond.

To try to offer some perspective, the S&P 500 closed today at 94xx, from the March 9 low of 676.53. That is a gain of 39.6% over a span of 57 sessions - 33 up, 24 down. Obviously, the days in which the index recorded gains, those were far superior in size than the days with losses. How well this has been orchestrated would make celebrated composer Leonard Bernstein blush.

Today's gains marked the 12th time during this span that the S&P has been up more than 20 points. By contrast, the index declined by that amount or more only 4 times through the same period. There has been no pullback or correction, as is almost always the case in rallies, no matter what the conditions or the degree of positive sentiment. This rally, unlike all others, has been nearly straight up, without any hint of a respite.

The kicker is that the S&P 500 index, should one like to apply Dow theory to it, should now be considered a PRIMARY BULL market, having successfully reversed the primary trend by topping the previous interim high of 934.70, posted at the close on January 6 of this year. That was off the low of November 20, 2008, of 752.44, and prior to the subsequent low of 676.53 (March 9, 2009). If one follows only the S&P 500, chartists would have to agree that we are now - without a doubt - in a bull market.

As an offset to that queer finding, the actual Dow Jones Industrial Index, upon which Dow Theory is based, still has room to run before breaking the primary - bearish - trend. The Dow would have to reach 9034.69, which it did on January 2, 2009, before declaring a new primary Bull market. The transportation index would also have to confirm, and, since those two events have yet to occur, one can safely assume that the current rally is indeed of the bear market variety, albeit quickly closing ground on fully debunking that data set.

All of this has occurred in an environment of growing, near-record unemployment, continuing declines in the median price of housing, a handful of Fed and Treasury initiatives to stimulate the economy, and the bankruptcies of Chrysler and General Motors, the latter occurring today and being the largest bankruptcy in the history of the United States.

While the Fed floods the world with newly-printed currency, commodities have also gained - not unexpected - as the dollar has declined against other currencies. All of this adds up to a great deal of uncertainty, a condition usually associated with market declines, not rapid, non-stop gains.

I, among others, have called the "top" incorrectly more times than we'd like to admit. There seems to be no stopping the engine of Wall Street, despite stocks on the S&P 500 having cut dividend returns to record lows while price-earning ratios have soared to levels normally associated with the end of long bull markets. The only way this rally continues is if the market is being manipulated, and that is the only conclusion which I can make at this point. There simply is not enough evidence that the economy has returned to a growth posture, nor any indication that stocks are actually being valued correctly, that is, discounting future growth. Most of the large gainers are actually showing a negative trend of declining earnings, which, in more normal times, would spark selling, not buying.

Dow 8,721.44, +221.11 (2.60%)
NASDAQ 1,828.68, +54.35 (3.06%)
S&P 500 942.87, +23.73 (2.58%)
NYSE Composite 6,169.0698, +165.00 (2.75%)

Advancing issues crushed decliners, 5159-1405. The biggest story of the day has to be the rollover of new highs finally surpassing new lows, 130-105. This is a reversal of a trend that has held in place every day except five or six since September, 2007. This is either the starting point of another bull run, which could dwarf even the current run-up, or a signal to sell everything as quickly as possible. The rally has pulled even the worst companies up by the bootstraps.

Volume on the day was higher than levels experienced last week, for no known reason, though not significantly.

NYSE Volume 1,500,474,000
NASDAQ Volume 2,647,576,000

Commodities in the energy area went ballistic. Crude oil gained $2.27, to $68.58, the highest point since November 4, 2008, seven months ago. Unfortunately, for those of us who still have to use gasoline to power our personal transportation devices, back in November of last year, prices were declining. They are now galloping ahead. Natural gas gained a whopping 41 cents, to $4.25, odd, because natural gas is primarily used for heating homes, and we are heading into warm summer months. The rise in natural gas was more than 11% in just one day.

Just as oddly, the metals responded in less-than-enthusiastic fashion. Gold actually fell 30 cents, to settle at $980.00. Silver gained 13 cents to finish at $15.74 per ounce in New York.

There were more "green shoots" of economic data, such as a 0.5% rise in personal income, a smaller-than-expected decline in personal spending and an 0.8% increase in April construction spending. Of course, those minor positives should have been more than offset by the largest bankruptcy in US history, the coming shutdown of 12-15 plants, job losses between autoworkers and dealers of more than 100,000, and a general malaise in manufacturing.

It just doesn't seem right that on the death of General Motors, Wall Street would throw a party.

Tuesday, April 7, 2009

Bear Market Rally Built on Fraud

Every day, day after day after day, the sharks on Wall Street do the same thing, over and over and over again. According to the new rules of the game, stocks are suddenly much more attractive at 2:30, or 3:00, or 3:15, or 3:30, without any news, without any economic reports, without any technical rationale, than they were earlier in the day.

This is called manipulation. Manipulation which occurs every day, without fail.

The pattern is so established and so obvious, eventually, the only people trading stocks will be the manipulators themselves, scratching and clawing for scraps, quarter points, half points, here and there, churning, deceiving, shorting stocks they are recommending to their clients and taking every last bit of available capital out of the hands of investors and into the black holes of the banks and brokerages.

It will eventually fail, and fail miserably. The smartest money got out of this market on Friday, the marginally less smart, Monday, and those with any brain cells left, after being slammed and hammered by instability and volatility, got out today.

With each passing day that the seven largest banks in America are allowed to continue doing business under a government-sponsored shroud of solvency - a complete and total fraud which I called as early as 2007, and others called even before me - stocks will be a very dangerous gamble. Those banks - Bank of America, Citigroup, JP Morgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley and American Express - are all insolvent and have been at least since September of 2008, some even sooner. All have benefited from injections of liquidity, cash and other government largess, courtesy of the US taxpayer, and still are underwater.

Finally, today, cracks began to widen in the flimsy fraud facade of "improving conditions", "signs of recovery", and other such nonsense being thrown around by the insipid morons on CNBC, on corporate boards and in the minds of witless fools who think they can make money in this environment.

After shaving 75 points off its 210-point loss in the final 1 1/2 hours, the markets were met with a torrent of selling in the final ten minutes of trading, pushing stocks close to their lows of the day. This should usher in more selling in days and weeks to come, as the rally built on nothing by hype, hope, lies and greed, completely falls apart. Conditions are not improving overall. They are getting worse, the recession deepening, business conditions deteriorating, credit squeezed to the breaking point, and fear re-emerging as the dominant sentiment.

And signs are clear that the economy will face heightened challenges in the months ahead, if the Business Roundtable Survey of 100 CEOs [PDF] is to be believed. Sixty-seven percent of those surveyed expected sales to decrease over the next six months. 66% expect to decrease capital spending, and 71% expect to lower employment over the same period. THESE GUYS SHOULD KNOW. THEY RUN PUBLICLY-TRADED COMPANIES.

The economic outlook index of the same survey fell to -5 (negative 5.0) in the period, the lowest level ever recorded in the six years of the survey and markedly lower than last quarter's reading of 16.5.

In case you need more proof of Wall Street's fraud and the true condition of the US economy, consider reading this New York Times story which explains how analysts expect earnings to be 37% lower than a year ago - a year which was already down from the previous year for many companies. You will learn that Standard and Poors reported that companies cut a total of $77 billion in dividends in the first quarter of 2009, the worst record of dividend cuts on record.

There was more bad news as the Times of London reported that the IMF may issue a report that bank toxic assets could reach as high as $4 trillion. Their previous estimate was $2.1 trillion. The report is due April 21.

Dow 7,789.56, -186.29 (2.34%)
NASDAQ 1,561.61, -45.10 (2.81%)
S&P 500 815.55, -19.93 (2.39%)
NYSE Composite 5,120.67, -128.81 (2.45%)

On the day, declining issues thumped advancers, 4897-1477. New lows were reached at 75 stocks, while a mere 10 recorded new 52-week highs. Volume was decimated by the lack of buyers. The smart money was moving out. The stubborn and the ill-informed remained in the market as stocks commence a cascade to lower levels. Volume has not been this low in four weeks, prior to the beginning of the massive ramp-up in stocks. Bulls will say the volume points out that today's decline is unimportant, though bears will point to three consecutive gains of lower highs and lower lows as proof that the bear market rally is out of gas.

NYSE Volume 1,261,882,000
NASDAQ Volume 1,868,136,000

Commodities were split, with the metals up and energy and food futures lower. Oil fell $1.90, to $49.15, on increased concerns over slack global demand. Gold ended a three-day losing streak, up $10.50, to $883.30. Silver added 10 cents to $12.21.

Finally, after the bell, Alcoa kicked off earnings season with a 59 cent per share loss, greater than the 56-cent loss analysts were expecting. It was the second straight quarter the company has posted a loss.

And, late in the day, news leaked out that General Motors (GM) was in "intense and earnest" preparations of a bankruptcy filing, in case the company fails to meet the requirements of the Obama administration's stringent restructuring plan.

I could not make this stuff up, folks. We, as a nation, are headed for economic hell.

Monday, March 30, 2009

GM, Chrysler Kaput. Is This News to Anybody?

Remarkably, the monstrous sell-off to begin what surely will be a testy week for investors, had as its catalyst an announcement by the federal government that the plans submitted by GM and Chrysler were inadequate in terms of qualifying for further federal assistance.

Remarkable in that the two companies have shown limited ability to comprehend the depth of their own problems, let alone the issues facing the entire global economy or the dictates which have been nothing if not clear from the Obama administration. Both companies have already received government assistance in the billions of dollars, have had ample time to devise realistic plans for their futures, and, even then, are asking for billions more.

Anyone with half a brain still functioning who had seen snippets of their plans - especially that of GM - could have seen with one eye closed that their projections were completely out of line with reality. GM, for instance, based many of its assumptions on selling 14 million vehicles in 2010, when they didn't even crack the 9 million mark in 2008. As far as Chrysler is concerned, their problems should not be an issue of national importance. They certainly are not too big to failnor are they worthy of any kind of public assistance, since they are a private company 80% owned by equity investors, Cerberus Capital, which has at its head, former Treasury Secretary John Snow and long ago decided to put Bob Nardelli in charge of Chrysler, the same Bob Nardelli who oversaw, as CEO, the near-destruction of Home Depot (HD) . Cerberus has already shed itself of Daimler, the profitable German subsidiary, and plans to partner with Italian automaker Fiat, a company in the throes of its own meltdown.

If the managers at Fiat have any sense, they'll steer themselves away from this private group of corporate bunglers, as should the government and taxpayers. And if anyone thinks that CEO Rick Waggoner, who submitted his resignation Monday at the behest of the White House, should be the beneficiary of any sympathy, bear in mind that under Waggoner's leadership, GM lost nearly $100 billion dollars and continued to build cars, trucks, vans and SUVs that guzzle gas and have limited appeal as its market share shrank and its stock price cratered.

These two bankrupt automakers, like the corrupt, insolvent, worthless national banks, should be allowed to do what all companies which have ceased to be competitive do: fail, file bankruptcy and either liquidate or reorganize. There's no good cause to keep them functioning any longer even though the damage to the economy would be paramount. The UAW would see 180,000 workers furloughed, pensioners could lose most of their future benefits and bondholders would be forced to take 10% or less on their dollars.

Life gets very tough when you don't have a backstop to bail you out, but this fiasco is just a furtherance of the insane, contradictory polices emanating from the Capitol and White House. The government has become such a major intermediary into business and Wall Street that their refusal to dole out more corporate welfare to companies that don't get it, causes a stock market rout and a resumption of the fear factor which has gripped the country for months, but took a few weeks in abeyance during the recent bear market rally.

Today's losses sent every index and sector into a tailspin which actually started on Friday of last week and probably won't end until the market is back below 7000 and looking to retest the March 9 multi-year lows.

Looking at the markets realistically, the bounce off the lows was so rapid and mostly unwarranted that an equally-severe snapback should have been expected. Despite the closing numbers, stocks were down even more in late afternoon trading before a mini-rally and short-covering brought all of the indices off their lows of the day.

Bulls can take some heart in the idea that the markets didn't completely fall off a cliff, and that volume was not nearly as high as last week's, though it points up the conclusion of more savvy investors that there are still a good number of players out there waiting to be skinned by the bears in coming days and weeks.

According to Investors Intelligence's Weekly Sentiment Poll bearish sentiment at the market lows earlier in the month were not even 50%, checking in at 47.2% at the bottom, hardly an indication of a market bottom. Sentiment would have to be closer to 80%, signaling capitulation, a condition to which today may have put us closer. It now seems almost certain that before the end of summer the market will finally roll over and die, though a few more trillion of investor dollars will have to be vaporized before the message finally becomes clear to the massive numbers of ill-informed investors which populate all income levels, from novice to wizened veteran.

The US economy is wrecked beyond simple recession-like repair, our banking system at the top is dysfunctional (though many smaller local and regional banks are healthy and poised to grow), unemployment will continue to rise well past 10%, states and municipalities are broke, consumers tapped out, homeowners hunkered down against high taxes and utility bills and the federal government running out of excuses as fast as they concoct rescues.

We are in a world of hurt and if you don't recognize all of the patterns, you deserve to lose everything. It's that stark and simple.

Dow 7,522.02, -254.16 (3.27%)
NASDAQ 1,501.80, -43.40 (2.81%)
S&P 500 787.53, -28.41 (3.48%)
NYSE Composite 4,899.05, -197.59 (3.88%)

On the day, market internals were miserable and pointing towards even worse conditions. Declining issues overwhelmed advancers, 5373-1163, and while that's nearly a 5-1 ratio, it was closer to 8-1 midday, and will almost certainly approach those levels at least a couple of times in coming days and weeks. Stocks reaching new 52-week lows - moderated by the huge number of companies which had already collapsed by this time last year - numbered 109, as compared to the feeble 14 new highs. As stated above, volume was off a bit from last week's strong levels.

NYSE Volume 1,511,506,000
NASDAQ Volume 2,028,632,000

Commodities witnessed a resumption of the deflation trade, with crude oil taking a big hit, down $3.97, to $48.41. Gold lost $7.60, closing at $917.70. Silver shed 23 cents, to $13.03. Almost every other major commodity was traded lower, except natural gas, which finished unchanged at the depressed price of $3.80/mmbtu.

Other financial news was similarly dire. Washington Mutual (WaMu) and its key executives are the subject of a massive class action lawsuit, home foreclosures were sharply higher in February and JP Morgan Chase will refund over $4 million to credit card holders who began paying $10/per month in additional fees in January. The deal was struck under pressure from NY Attorney General Andrew Cuomo.

As the week progresses, more economic reports will be revealed, including home prices, consumer confidence, auto and truck sales, private sector employment, all leading up to Friday's non-farm payroll report for March and new unemployment statistics.

Hold onto your hats, but sell your stocks if you played and have any gains over the past few weeks.

Thursday, March 5, 2009

Stocks Routed Worldwide; NASDAQ Capitulates

Stock indices from Tokyo to Toronto suffered major losses again on Thursday as the global depression deepened and General Motors (GM) contemplated bankruptcy unless it receives additional financial support from the US government.

As the steady pounding continued, following the first gains in a week (yesterday), investors wiped out nearly double the amount of Wednesday's gains.

Dow 6,594.44, -281.40 (4.09%)
NASDAQ 1,299.59, -54.15 (4.00%)
S&P 500 682.55, -30.32 (4.25%)
NYSE Compos 4,267.60, -197.29 (4.42%)

There was no standout sector or industry spared from the widespread carnage, as the NASDAQ finally became the 4th major index to fall below the previous, November 20 lows. On that date, the NASDAQ closed at 1313. Today's close was 1% lower and comparable to October 2002 levels, when the NASDAQ bottomed out following the dotcom bust on October 9, at 1114.11.

As has been the case for months, US banks were at the center of the storm. Citigroup (C) traded below $1.00 for a brief time during the morning, closing down another 0.11, at 1.02. Bank of America (BAC) closed down 0.42, to 3.17, while JP Morgan Chase (JPM) tumbled 2.70, to 16.60. All of those were among the major losers of Dow components, though General Motors took the prize as the day's biggest, losing 0.34, to 1.86, a decline of 15.45%.

On the Dow, only 2 of 30 components gained ground. Pfizer (PFE) added 0.17, to 12.67. Wal-Mart (WMT) was up 1.26, to 49.75, as the nation's largest retailer saw improved same-store sales for February and increased its dividend to shareholders.

Market internals were a shambles, with decliners overwhelming advancing issues, 5823-842, a 7-1 ratio. New lows shot up to levels seen only in the September-November meltdown, with 1527 stocks reaching new 52-week lows versus only 7 new highs. Volume remained elevated, as it has over the past 7 sessions.

NYSE Volume 1,878,339,000
NASDAQ Volume 2,314,223,000

Oil futures were off $1.77, to $43.61. Gold emerged as a safe haven, up $21.10, to $927.80. Silver added 21 cents, to $13.12.

Prior to the opening bell on Friday, the Bureau of labor Statistics releases February Non-farm Payroll numbers. Expectations are for another 630,000 job losses.