Wall street's Week of Worry Ends With JP Morgan Mea Culpa

In a week that will be remembered as one in which the Euro crisis came front and center, Wall Street turned its eyes upon an unlikely victim Friday, that being JP Morgan Chase.

The bank known for its "fortress" balance sheet (pure baloney) confessed to have had made a terribly wrong bet on a risk hedge - a la MF Global? - and poof went $2 billion. CEO Jamie Dimon explained how badly the bank had mistaken the markets in a conference call with journalists Thursday night after the close.

Details were sketchy, though it was widely assumed that there would be other victims in the trade involving a British trader known quaintly as "the Whale." The issue points up that even the brightest of the bright can make mistakes - and big ones at that.

While JPM's misplaced risk hedge sent futures into the tank pre-open (as if they needed any help with that), stocks initially sank, then rallied sharply into positive ground in the morning session, though all gains were ephemeral and summarily whisked away by the close, ending Wall Street's worst week in more than seven months.

Even though losses were tiny - and the NASDAQ managed to close positive by 0.18 points - signs of calamity were everywhere, from German citizens daring Greece to default and leave the Euro, to massive misapprehension over the proposed "Volker Rule" in light of the Morgan fiasco, to spiking Spanish bonds, slowing growth in China and a deflating PPI, which came in under expectations at -0.2% for April.

As the session ended with everybody closing positions in case some new, terrifying developments took place over the weekend, the once mighty, banker-run trading casino closed out the week with players seeking solace and probably more than a few strong drinks to soothe their jangled nerves.

Nobody can tell how events will play out exactly during the coming weeks, though, from the tenor of the trade this week, it seems pretty likely that conditions are not going to materially improve any time soon.

TGIF, indeed.

Of note, the Dollar Index advanced for the tenth straight day, explaining why precious metals have been pounded down so roughly over the past two weeks; and, new lows bettered new highs for the fifth day in the past six.

Dow 12,820.60, -34.44 (0.27%)
NASDAQ 2,933.82, +0.18 (0.01%)
S&P 500 1,353.39, -4.60 (0.34%)
NYSE Composite 7,816.48, -36.27 (0.46%)
NASDAQ Volume 1,692,045,125
NYSE Volume 3,727,488,000
Combined NYSE & NASDAQ Advance - Decline: 2225-3322
Combined NYSE & NASDAQ New highs - New lows: 107-131
WTI crude oil: 96.13, -0.95
Gold: 1,584.00, -11.50
Silver: 28.89, -0.29

China's Slowing GDP a Symptom of Faltering Global Economy

Yesterday's rumor that China would report first quarter GDP of upwards of 9% growth - which fueled the ramp-up in stocks on Thursday - turned into today's reality that China's economy is slowing, and quickly.

When the news that China's economy grew less than expected - by 8.1%, the slowest rate of growth in the world's most populous country in nearly three years - traders in Europe and the US could not sell shares of selected equities quickly enough. By the time US markets opened, futures had cratered to their lowest levels of the morning and the selling continued throughout the lackluster session.

By he close, Thursday's gains were all but eviscerated, leaving investors to wonder what comes next in terms of the global economic condition.

Also, prior to the open, two major banks, JP Morgan Chase (JPM) and Wells-Fargo (WFC) announced first quarter earnings. Both beat estimates, but the stocks sold off on the reports, many analysts citing bookkeeping chicanery for the better-than-expected returns.

By the end of the day, JPM dropped 3.64%, while WFC lost 3.47%. Both stocks are near 52-week highs and are currently looking like serious short-sell candidates.

The Chinese data should not have come as a surprise. Since most of China's recent growth has been tied to exports - mainly to the US and Europe - slack demand has crimped output and China's nascent middle class is not yet robost enough to fill in the growth gap. Concerns over the debt condition of the Eurozone have not abated, and, in fact, may be exacerbated as Spain's situation worsens.

Sooner or later, principals are going to have to come to terms with the global condition of faltering sovereign nations, an excessive overhang of debt and limited solutions from fiscal and monetary authorities. The search for yield has many investors scrambling again into dividend-paying stocks or the marginal returns of US treasuries, which rallied once more, the ten-year dipping to 1.99% at the close of trading.

In such an environment, there is no safe harbor except for hard assets, though even oil, gold and silver were pounded lower on the news.

The major averages finished the week with losses of around two percent. The idea that stocks sporting solid gains for the first quarter have been selling off nevertheless, portends more downside for equity investors.

Deflation is a cruel environment, for which most in the financial arena are ill-prepared. The global economy is close to stall speed, which, for most ordinary people, is bliss, though the highly-leveraged worldwide financial system is surely strained at present.

Dow 12,849.67, -136.91 (1.05%)
NASDAQ 3,011.33, -44.22 (1.45%)
S&P 500 1,370.27, -17.30 (1.25%)
NYSE Composite 7,937.65, -102.31 (1.27%)
NASDAQ Volume 1,437,334,625
NYSE Volume 3,433,928,000
Combined NYSE & NASDAQ Advance - Decline: 1332-4234
Combined NYSE & NASDAQ New highs - New lows: 95-69
WTI crude oil: 102.83, -0.81
Gold: 1,660.20, -20.40
Silver: 31.39, -1.14

Bankster Kleptocrats At It Again: Bank Stocks Up, Gold, Silver Down

One of the more tried and true methods of tape-watching is what's known in the business as "follow-through" - the tell-tale next day move in a stock or an index following a bold rally.

A lack of follow-through or extension of the rally usually means that the initial move was either false, poorly-constructed, had less-than-optimal participation or a combination of all of those.

If the tape is correct the day after the biggest one-day upside move in stocks this year, then today's trading certainly did little to confirm the veracity of the rally. With the Dow and NASDAQ up marginally at best, the slight decline in the S&P and the pretty healthy drop on the NYSE Composite reveal the tell-tale signs of a market rally surred on entirely by insiders, those of the Wall Street bankster crowd commonly known as the kleptocracy.

Their aim, obviously, was to instill a desire for individual investors to jump into those juicy big bank stocks like Bank of America (BAC), JP Morgan Chase (JPM), Goldman Sach (GS) and everybody's favorite, Citigroup (C), which incidentally was one of the four which failed the Fed's marginally-constructive stress tests on Tuesday.

The other fairly obvious feature of the Tuesday rally was the often overlooked calendar, which shows clearly that Friday is the third Friday of the month, meaning, yes, siree!, Tuesday's move was decidedly correlated to making oodles of cash on front-end, expiring call options.

Want proof? Take a look at the imbalance of open interest puts to calls on the 40 and 41 strikes of Friday's expiring options in JP Morgan. There were nearly 69,000 calls at those two strike prices, compared to about 25,000 puts. Since we all know there's no free lunch in America - unless you're a school-kid with cheap parents or a bankster will plenty of one-percenter street cred - the imbalance should be a tip as to what happened late yesterday afternoon, when Jamie Dimon jumped the shark and released his firm's (JPM) dividend upgrade before the Fed could expel the stress tests of the other banks. Talk about front-running! Jaime wrote the book with that move.

And for more proof, look below at the Advance-Decline line for today. The rally was definitely sold into by money smarter than that of most people. Volume was at its usual dismal level again today as well.

Just in case anyone thinks the Fed's stress tests were anything more than a call to action from the Fed to individual investors who don't believe a word that comes from ben Bernanke's mouth, one should definitely take a read of Chris Whalen's excellent article at Zero Hedge, Bank Stress Tests and Other Acts of Faith

One needn't be a bank examiner or financial wizard to understand what Whalen means when he says things like,

So when I look at the Fed stress tests, which seem to be the result of a mountain of subjective inputs and assumptions, the overwhelming conclusion is that these tests are meant to justify past Fed policy.

or

But as we have written over the past several weeks in The Institutional Risk Analyst, the Fed does not want to believe that there is a problem with real estate.

Face it, the Fed's stress tests of 19 of the nation's largest banks were nothing more than a pimp act for their favorite bailout buddies, designed to boost their share prices so insiders could profit at the expense of smaller, less-savvy investors and traders.

If that wasn't enough - and you know it wasn't - the raid on gold and silver today speaks volumes about the un-American policies the Fed pursues. According to the Fed, holding near-worthless scraps of paper like stock certificates of shares in illiquid banks or constantly-devaluing Federal Reserve Notes is far more prudent for us "little people" (or as Goldman Sachs executives like to call their clients, "muppets") than holding onto those relics of the past, gold and silver.

The gloves are off, folks. The Fed, the banksters, the kleptocracy of corporate America has had them off for a long time, bare-knuckling the American middle class like a punch-drunk patsy. It's time Americans with brains (maybe 30% or so of the population) rip off the Everlasts and land a roundhouse on the chops of these wealth thieves.

Close out the 401k, pension plan or whatever vehicle they're "managing" your money in and go buy some silver coins or bars, gold, or land, raise some chickens or pigs, grow some corn or tomatoes or broccoli, but at least stop putting your money into the wall Street Ponzi scheme.

That's going to be easier said than done for a lot of people who have their futures tied into their government sponsored pension plans, which, by the way, will pay out a lot less than expected when the s--- hits the fan, but, if the outflows from mutual funds over the past four years is any indication, you don't want to be one of the last players in the market (otherwise known as bagholders) when the rugs gets pulled out and the bottom drops out of the bottomless pit the financial "industry" has created.

It could be two years, two months or two weeks before the next market "event" but you don't want to be around when it happens and you definitely don't want it all to fall on your pretty little head, now do you?

Tomorrow, we'll take a look at the moves in bonds, and why what they're telling us is very, very bad.

Dow 13,194.33, +16.65 (0.13%)
NASDAQ 3,040.73, +0.85 (0.03%)
S&P 500 1,394.28, -1.67 (0.12%)
NYSE Composite 8,180.17 54.30 (0.66%)
NASDAQ Volume 1,627,102,500
NYSE Volume 4,446,792,500
Combined NYSE & NASDAQ Advance - Decline: 1631-4036
Combined NYSE & NASDAQ New highs - New lows: 318-38
WTI crude oil: 105.43, -1.28
Gold: 1,642.90, -51.30
Silver: 32.18, -1.40

Friday the 13th Unlucky for JP Morgan, Europe Sovereigns as Debt Ratings Are Slashed

Friday the 13th was unlucky for most investors as stocks slipped over concerns of "imminent" credit downgrades in Europe and JP Morgan Chase's (JPM) quarterly results disappointed on revenue.

JP Morgan released 4th quarter and annual results prior to the opening bell sending related financial stocks into a tailspin.

JPM's earnings excluding items met expectations of 90 cents per share, a decrease from $1.12 per share in the year-earlier period, but full-year net income was $19 billion, down from $26.72 billion a year ago and well below analyst expectations of $23 billion. Quarterly net income was $3.72billion, down from $4.83 billion a year earlier.

JP Morgan was down 93 cents at the close, to 35.92, a loss of 2.52%.

It wasn't long after trading commenced in New York that news began leaking out, via Reuters, that many European nation's credit ratings were about to be downgraded by Standard & Poor's, which had put all 17 Eurozone nations on credit watch negative on December 5th.

The persistent rumors haunted european bourses, which fell dramatically on the news. Finally, after US markets closed in advance of a three-day weekend, S&P confirmed, dropping the credit ratings of nine countries, leaving only Germany with the gold-standard, AAA rating.

The following list, courtesy of London's daily Telegraph details the action:

France CUT one notch to AA+
Austria CUT one notch to AA+
Italy CUT two notches to BBB+
Spain CUT two notches to A
Portugal CUT two notches to BB (junk)
Belgium AFFIRMED at AA (the country was cut in November)
Malta CUT one notch to A-
Cyprus CUT one notch to BB+ (junk)
Luxembourg AFFIRMED at AAA
Germany AFFIRMED at AAA
Slovenia CUT one notch to A+
Slovakia CUT one notch to A
Ireland AFFIRMED at BBB+
The Netherlands AFFIRMED at AAA
Estonia AFFIRMED at AA-

All outlooks remain negative, except for Germany and Slovakia.

US stocks were crushed in the early going, but rallied throughout the afternoon, limiting losses. The Dow Jones Industrials were off by as much as 160 points in early going.

The Euro fell to its lowest level in 16 months vs. the US Dollar, at $1.2667, which is actually good news for European exporters and generally bad for US companies doing business in Europe.

Volume in US markets was weak (same old story) as participation levels have fallen off dramatically since the 08-09 financial crisis, many individual investors pulling money out of equities via funds and/or personal accounts. The low trading levels is somewhat of a bell-weather for the economy, mirror low participation rates in the labor force as Americans seek alternatives to both investment and traditional working roles.

The losses today pretty much cut the week's gains for the major indices in half. Stocks have been grinding higher through the first two weeks of the year, but there seems to be little conviction from traders.

Next week will be chock-full of earnings reports, many of which will meet or beat expectations, though the number of pre-announcements has been running unusually high for the 4th quarter and investors are nervous, as action in the financials and JP Morgan, in particular, made quite clear.

Also, Greek talks with creditors have broken down, leaving open the possibility that the proposed 50% voluntary haircuts on Greek debt would become involuntary, triggering credit default swaps payouts as early as March, when Greece is scheduled to receive another round of funding from the IMF and ECB.

Dow 12,422.06, -48.96 (0.39%)
NASDAQ 2,710.67, -14.03 (0.51%)
S&P 500 1,289.09, -6.41 (0.49%)
NYSE Composite 7,632.03, -49.23 (0.64%)
NASDAQ Volume 1,686,001,750
NYSE Volume 3,692,377,750
Combined NYSE & NASDAQ Advance - Decline: 1874-3682
Combined NYSE & NASDAQ New highs - New lows: 142-50
WTI crude oil: 98.70, -0.40
Gold: 1,630.80, -16.90
Silver: 29.52, -0.60

Greece, Italy Send Stocks Overboard Again

Doings on the Continent have been keeping traders on their toes for months, but today's antics bordered on the bizarre.

First Greek Prime Minister George Papandreou called for a public referendum on the latest bailout plan, just approved days ago in late-night negotiations by European leaders. Making matters even more confused, Papandreaou scheduled the referendum for some time early next year, which would hold global markets hostage for months while the Greeks decide their own fate.

A "NO" vote on the austerity plans tied to Greece receiving more funds from the EU and IMF, would scuttle months of planning and negotiations and would likely result in Greece being tossed from the European Union. Such an outcome would surely roil markets terribly, though the mere thought of waiting two to three months for what almost certainly would be a negative result sent shock waves through European bourses and US exchanges today.

Reacting to the news, German Chancellor Angela Merkel and French President Nicolas Sarkozy planned emergency talks with leaders of the EU and the IMF, though it was not clear whether Mr. Papandreou would be invited.

And, if Greece's gambit wasn't enough to turn investors away, there's a confidence vote set for Friday, in which Papandreou's Socialist Party could lose control of the government, which it holds by only two seats in the parliament. The situation in the Mediterranean nation have moved from bad to worse to bizarre over the past few months.

In Italy, despite the agreements worked out last week, bond yields continued to spike higher, with the 10-year Italian bond reaching upwards of 6.22%, a more than 400-basis point difference over the stable German Bund. The bond spread blowout added to fears that Italy might be in more danger than previously thought - which, in itself was already severe - as the Italian government has to roll over nearly $2 trillion in bonds over the next year, a hefty sum.

Under the leadership - if one can call it such - of Prime Minister Silvio Berlusconi, Italy has failed to act on measures set down by the EU in August and leaders of two main banking and business associations have called on the prime minister to act swiftly or step aside. For his part, Berlusconi has made promises to act quickly, though many doubt he has the emotional or political will to implement the harsh austerity measures called for by other European leaders. As can-kicking goes, Berlusconi is world class, a foot-dragger with a penchant for putting off the obvious, though most of the other leaders in the EU have displayed similar inability to act courageously or quickly.

Also nagging US markets was the early-in-the-day report on ISM Manufacturing Index, which showed a marked decline, from 51.6 in September to 50.8 in October, another sign that the US economy was in danger of falling into another recession.

Stocks were pounded right from the opening bell, though a late day rally was attempted and then scuttled as news from Greece suggested more of a guessing game than any kind of deliberate policy action.

Speaking of policy, the Federal Reserve is locked in meetings on rate policy, which will be announced at 12:30 pm Wednesday, a deviation from the usual 2:15 pm time. The policy decision will be followed by a press conference with Fed Chairman Ben Bernanke. While it is virtually assured that the Fed will not change the federal funds rate from levels approaching zero, some are betting that another round of QE will be announced in some form, though the effectiveness of such an undertaking - already tried twice since the 2008 financial crisis, without effect - is very much in doubt.

Prior to that, ADP will release its private payroll data for October, which serves as a proxy for the "official" non-farm payroll data release by the Labor Dept. on Friday.

Not surprisingly, some of the biggest losers on the day were the large banks, such as Wells-Fargo (WFC), Bank of America (BAC), JP Morgan Chase (JPM), Citigroup (C) and Goldman Sachs (GS), the usual culprits now caught between a sagging economy, exposure to Europe and the unwinding of MF Global, which filed for bankruptcy protection on Monday.

The silver lining for consumers came from a two-day rally in the dollar - mainly against the Yen and Euro - sending commodity prices lower across the entire complex.

Dow 11,657.96, -297.05 (2.48%)
NASDAQ 2,606.96, -77.45 (2.89%)
S&P 500 1,218.28, -35.02 (2.79%)
NYSE Composite 7,338.48, -226.55 (2.99%)
NASDAQ Volume 2,314,571,500
NYSE Volume 5,656,978,000
Combined NYSE & NASDAQ Advance - Decline: 859-4813
Combined NYSE & NASDAQ New highs - New lows: 24-89 (flipped)
WTI crude oil: 92.19, -1.00
Gold: 1,711.80, -13.40
Silver: 32.73, -1.62

Stocks in Panic Mode; Bankruptcy Lines Forming: High-Low Indicator at Extreme; Social Fabric Shredding

The Markets

Stocks began the fourth quarter the same way they ended the third, with waves of selling on fears of a Greek default and recession in the US and Europe.

After an initial lift from fair economic data, especially the ISM index posting a 51.6 number after a 50.6 reading in August and August construction spending showing a 1.4% gain, US stocks drifted lower throughout the day, with the final onslaught taking the S&P 500 to a close of 1099.21, the first time the widely-watched index closed below 1100 since September 8, 2010 (1098.87) and well below the recent low of 1120.76 (August 10). The S&P now stands (or slouches, as the case may be) less than nine points from official bear market territory, which would commence at 1090.89. The S&P is down 12.6% for the year.

The other major indices are also closing in on bear market territory. Another day like today would send the NASDAQ down more than 20% from its April 29 highs. The Dow Jones Industrials are faring best of the bad lot, though still just 375 points from marking a bear market.

Losses began overnight in Asian markets and cascaded through Europe and into the Americas. Most European bourses have been in bear markets for more than a few months.

News flows from Europe were not encouraging as the 17 countries which are backing Greek bailout funds met again on Monday but failed to come to an agreement on the second tranche of aid to the failing EU member.

That sent stocks into negative territory for the remainder of the session, closing at the lows of the day on very heavy volume in a broad decline. All 12 sectors were lower on the day, led by capital goods, financials and energy. WTI crude oil closed at its lowest price in over a year, fueling speculation that lower gas prices are on the way as weather cools and demand falls.

Dow 10,655.30, -258.08 (2.36%)
NASDAQ 2,335.83, -79.57 (3.29%)
S&P 500 1,099.23, -32.19 (2.85%)
NYSE Compos 6,571.45, -220.20 (3.24%)
NASDAQ Volume 2,523,549,250
NYSE Volume 6,714,723,500
Combined NYSE & NASDAQ Advance - Decline: 772-5877
Combined NYSE & NASDAQ New highs - New lows: 19-1405
WTI crude oil: 77.61, -1.59
Gold: 1654.40, +29.60
Silver: 30.33, +0.36


After the bankruptcy filing of Swedish automaker Saab last month signaled the coming onrush of large corporate bankruptcies, three companies have been making news on that front.

Eastman Kodak (EK), which has hired the law firm of Jones Day to explore "reorganization" possibilities, rallied back strongly after Friday's stock collapse. The company's shares are at a bargain-basement level of 1.34, a 77% gain on the day. Reports that creditors and investors are speaking to advisors have surfaced as the company continues to burn through $600-700 million annually off their broken business model, negatively impacted by the advent of digital photography.

Shares of American Airlines (AMR) were halted today amid rumors of bankruptcy filing. The oldest US legacy carrier lost 33% today, closing at 1.98.

The banking sector continues to be rocked by the continuing mortgage morass, new regulations and now, computer glitches. Bank of America's website and online banking functions were unavailable to millions of customers for a long time over the past few days, frustrating and infuriating its customer base just days after announcing that debit card users would face a five-dollar-per-month fee beginning in January for the privilege of spending their own money. Shares of the nation's largest bank closed down 59 cents, at 5.53, the lowest price since the depths of the financial crisis, when the stock closed at 3.12 on March 6, 2009.

Along with the S&P 500 breaking below 1100, the number of new lows today was a screaming signal to "get out of Dodge" as quickly as possible. Those 1405 new lows are at a level not seen since autumn of 2008, when the entire financial system was on its knees and needed a $700 billion "fiX" courtesy of a deal ripped from US taxpayers by then-Treasury Secretary (thief) Hank Paulson and Fed Chairman Ben Bernanke. No other indicator has been as reliable or accurate in picking crashes than the New high - New low indicator. According to the indication that has been flashing for weeks, a major down-leg is about to commence, especially with the NYSE, Dow, NASDAQ and S&P 500 all closing below support levels during the recent two-month slide.

This is a potentially world-shattering situation that has been developing for not just the past two months, but over the past three years. Stocks could free-fall as financial institutions in Europe, Asia and in the US face severe liquidity and solvency issues and sovereigns are unable to save them this time, concerned, rightfully so, with their own continued existence. The level of public distrust has risen to unprecedented levels. Over 700 people were arrested in New York, trapped on the Brooklyn Bridge (see video below) by New York City police funded by JP Morgan Chase.

This is only the tip of the news iceberg the mainstream media doesn't want the US public to see, hear or read. Peaceful protests in Boston, New York, St. Louis and Kansas City have taken on new life, resulted in mass arrests and are a threat to the ruling elite.

The entire human population of the planet is teetering on the brink of mass rioting and localized anarchy.

Precious Metals Mayhem; Gold Down $100; Silver Slammed

There are plenty of theories on what took place in precious metals markets over the past few days, but the best possible explanations really don't hold up to closer scrutiny.

Some say that there were margin calls in stocks and that traders trundled out of gold and silver, though that would not explain why the biggest hits were today, unless there were some overnight desperation calls.

Others suggest that this is all a coup by central banks in anticipation of a major monetary event, such as a Greek default or a major Euro-zone banking collapse, or possibly even the shutdown of the US government, which, if our nitwit congress-people have it in their power (and they do) may just occur as early as October 1 (nice that it falls on a weekend, too).

That maybe makes more sense, as anyone with half an interest in current geopolitics knows the central banks are working in a coordinated fashion these days, knowing that the time left for successful fiat money may be measured in days or months, no longer in years. With the Fed turning 100 in 2013, that would seem a fitting date to implode the entire global ponzi fractional reserve scheme, smack dab in the first year of a new president's term.

Of course, there is still the famous short silver position of the fabled Blythe Masters of JP Morgan, which could explain quite a bit, especially in terms of the solvency of that fine financial institution, in particular.

Whatever the case, haters of real money are having a field day, supposedly impressed that gold has fallen back to levels last seen at... hmm, the beginning of August (yes, less than two months ago) and silver is currently where it was at the start of 2011. These short-sighted individuals should bear in mind that all of the major indices of US stocks are BELOW where they began the year.

The public lovers and hoarders of silver and gold have been making "back up the truck" references all day long, seeing this latest price movement as either a liquidity or solvency event and are prepared to scale in buying at these levels while hoping the price foes even lower. With them, there is overall agreement that whatever is causing the price of the precious metals to shudder over the past 48 hours has more to do with the sustainability of current political and monetary factions rather then the intrinsic values of two metals which have stood the test of time as currencies for the past 5000 years.

Whatever the cause, it should be seen as a buying opportunity, with caution to purchase only physical metal, not ETFs or mining stocks, and to scale in according to your risk perspective. With the weekend on hand, prices should firm up in a few short hours, and the metals are currently well off the lows of the day, when gold was down my more than $100 briefly and silver had printed - for a short time - at a $29-and-change handle.

That was where all the action was today. Stocks were essentially flat, which is something of a surprise, following a day-and-a-half of vicious selling pressure.

A good idea would be to head to your local precious metal outpost and make the best deal you can on gold or silver, bars or coins, take your pick, because there is going to be a break between the paper prices of the EFTs and the physical market, which is splintered amongst thousands of coin and bullion dealers scattered around the globe. The CFTC has done nothing to protect PM investors from raids like these, allowing big outfits (like HSBC, JPM and central banks) to run naked shorts in violation of position limits without so much as a quiet "no, no." And, when the fiat currency regime ends, as have all paper currencies backed by nothing but "trust" which has now been broken a thousand times over, gold and silver will re-emerge as "real" money.

Precious metals prices may go even lower in a deflationary environment, but, as the central banks engage in more easing, money printing and currency debasement, gold and silver will take on their own lives as legitimate currencies and soar in value. Any way you look at it, this is a godsend for anyone underinvested in precious metals, because, unlike stocks, currencies or bonds, they are not debt-based instruments and there is no counter-party risk.

God Bless Ron Paul!

Happy Friday!

Dow 10,771.48, +37.65 (0.35%)
NASDAQ 2,483.23, +27.56 (1.12%)
S&P 500 1,136.43, +6.87 (0.61%)
NYSE Composite 6,770.73, +44.11 (0.66%)
NASDAQ Volume 1,987,216,125.00
NYSE Volume 5,639,933,500
Combined NYSE & NASDAQ Advance - Decline: 4195-2340
Combined NYSE & NASDAQ New highs - New lows: 11-477
WTI crude oil: 79.85, -0.66
Gold: 1655.00, -81.50
Silver: 31.15, -4.69

BUMMER: The Plunge Protection Team Is Back in Action!

The Markets

Let's face it. US equity and commodity markets are completely, irretrievably, unconscionably manipulated beyond any basic sense of fairness.

On the morning of the first trading day of the week, US equity scalpers were met with futures that forecast a dismal Monday. Every index in every foreign country was lower on the day. In Asia, the Hang Seng led the way with a loss of greater than 4%. European bourses, shattered for the better part of the past three months, were all lower, the French CAC-40 taking over from the German DAX in leading the way to oblivion with a 4% decline.

But here in America, we have advantages. We have Ben Bernanke, the brilliant, often uninspiring and always shaking Chairman of the Federal Reserve. We have Timothy Geithner, the diminutive (matching his brain power) Treasury Secretary who keeps a watchful eye over the nation's exploding debt.

And we have printing presses (actually, they've been replaced by computers) spitting out US dollars faster than a 9th Avenue hobo picks up pennies thrown his way.

More than anything else, however, we have the fabled Plunge Protection Team (PPT), aka the President's Working Group on Financial Markets created by President Reagan in the aftermath of the LTCM blowup in 1987.

According to Executive Order 12631, the "Working Group" was established explicitly in response to events in the financial markets surrounding October 19, 1987 ("Black Monday") to give recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence.

In other words, when the markets are crashing, the Working Group, or PPT, springs, like trained attack Dobermans, into action to rescue witless investors from parting with their increasingly worthless cash.

Today, the PPT got busy early on. Stocks were hammered at the open, in response to the rest of the world in a near panic over Greece potentially defaulting and European credit market spreads blowing out all over the place. Stocks were down huge in the opening minutes of trading, as an extension of Friday's selloff and the continuing global debt implosion. The fact that Greece will eventually default on a large portion of their debt and ungraciously remove itself from the Euro standard (back to the Drachma) is unimportant to the functioning of the PPT. They buy futures. They buy stocks. They buy whatever is falling fastest, which on Monday, was just about anything that had a ticker symbol.

The PPT doesn't always prompt rallies. Their normal function is to keep US indices from falling too far, too fast, like today, like about six times in the past three weeks, like about a thousand times since the dotcom crash of 2000. And today was no different. They kept he markets in a sane neighborhood, down somewhere between a half and one per cent, until, that is, all the lights turned green.

Around 2:30, the Financial Times, another overstuffed relic from the days of ink and newsprint, ran a story that China was interested in buying Italian bonds, many of which will go up for bid this week as the Italian government seeks to finance its long-standing tradition of turning investor dough into pasta salad, along with assorted mafia side dishes and Berlusconi desserts.

Since noodles are noodles, whether they're doused in marinara or lobster sauce, the nitwits on CNBC were led to believe that this was a great idea, and the markets turned from merely moribund to miraculously magnificent in the final hour-and-a-half of trading. The US wins again. All of the US indices ended the day in positive territory.

Now, some may cheer that the US government has investor's backs, but the stark reality is that the PPT is all that's left between regular day-to-day life and a most serious, full-blown market crash of stupefying proportions. The global economy is on its knees due to too much debt, too many goods and too many currencies trying vainly to devalue themselves. The entire affair is deflationary in the most absolute sense as goods and services become more and more worthless, while the relative value of the currencies which buy such goods plummets into an phalanx of money-crunching debt.

Ah, for the good old days of really free, open markets, like back in the sixties and seventies, when a stock could be worthwhile returning a reasonable four to five per cent dividend along with annualized growth of 15-20%. A quarter point here, a half point there. We were all invested and looking forward to a safe, sensible and sane retirement.

Nostalgia. It's what one gets when one sees the fruits of labor lavished on the already rich.

And by the way, the day should not pass without acknowledging that Jaime Dimon, CEO of JP Morgan Chase, thinks the Basel 3 rules requiring the largest banks, such as his, to hold 9.5% of tier one capital, are "un-American." Right. FU, Jaime. Is JPM the next bank to start selling off assets? Probably should, but probably won't. Hey, the world is an imperfect place, suitable for misfit rich kids like Jaime.

Dow 11,061.12, +68.99 (0.63%)
NASDAQ 2,495.09, +27.10 (1.10%)
S&P 500 1,162.27, +8.04 (0.70%)
NYSE Composite 7,047.12, +2.11 (0.03%)
NASDAQ Volume 1,994,098,375
NYSE Volume 5,034,112,500
Combined NYSE & NASDAQ Advance - Decline: 3178-3364
Combined NYSE & NASDAQ New highs - new lows: 19-514
WTI crude oil futures: 88.19, +0.95
Gold: 1815.80, -42.80
Silver: 40.29, -1.09

Astute readers will understand what it means when all the major indices are up, but the A-D line is negative and especially when the new highs - new lows are tilted so heavily in favor of the lows. For those who still need guidance, it's a con, a complete, total, 100% sham. That oil futures are up while gold and silver suffer heavy losses really cinches it.

Idea: Fresh out, though working hard on "Making a budget and sticking to it," and "Saving 10% of your income." More tomorrow.

Government Sues 17 Banks Over Faulty Mortgage Backed Securities

This news broke early on Friday, but details were just coming in as the markets were closing.

The Federal Housing Finance Agency is the conservator for failed federal GSEs, Fannie Mae and Freddie Mack. The agency seeks a total of $196 billion in damages in state and federal courts from the named defendants, including some $24.853 billion from Merrill Lynch and First Franklin Financial (owned by Bank of America). All of the charges are made in connection with false or misleading representations and warranties made to Fannie and Freddie by the banks.

The list is pretty much a who's who of the sub-prime and general mortgage crisis which pushed the global economy to the brink of disaster back in 2008, including such notables as Goldman Sachs, Bank of America, JP Morgan Chase, Citigroup, Countrywide Financial (now part of Bank of America), Deutsche Bank and others.

American Banker points out that the largest exposure - $57 billion - belongs to Bank of America (BAC) because the bank not only sold $6 billion of MBS to Fannie and Freddie, but the figure grows larger when factoring in the damages charged against Merrill Lynch and Countrywide, both acquired by BofA during the financial crisis. JP Morgan Chase has to deal with $33 billion in claims, including those of Bear Stearns and Washington Mutual, both of which were taken over by JP Morgan Chase.

Below is the press release in which the agency lays out the charges. Here is a link to the individual cases.

FHFA

While most of the American public must be cheering this news, it's about the worst that could happen to the TBTF banks, being that their reputations and balance sheets are both on shaky footing. The hardest hit will surely be Bank of America, which is being sued by virtually the whole planet, including AIG and USBancorp.

The litigation involved in these cases will likely take many months, if not years, to settle and will cost the banks dearly in legal costs, which are already taking their tolls on profits.

In addition to the banks, a multitude of individuals are charged with various violations of securities laws, though none of the CEOs - such as Jaime Dimon, Dick Fuld or Lloyd Blankfein - are among the defendants. Obviously, the government is going after the lowest-hanging fruit in an attempt to garner public support by going after "bad guys."

This is a developing story with far-reaching implications for the global economy. MoneyDaily will stay abreast of events as they develop.

With any luck, we may witness actual "perp walks" as the lower-level employees implicate the top rung of the banking elite. The thought of seeing Jaime Dimon or Lloyd Blankfein in leg irons and handcuffs is almost too delicious to consider.

Well, We All Knew This Was Coming

Nothing, in the world of the financial markets, moves in a straight line, so it was only a matter of time that the stock indices would cease falling and post a day of positive, "green shoots" results, and today was that day.

Call it whatever you like - PPT manipulation, dead cat bounce, oversold conditions, snap-back rally - it's nothing out of the norm for markets to do these kinds of things, and, taking a word from Fed Chaiman Ben Bernanke, it is likely a "transitory" event, like the wind, which passes on and blows in another time and place.

Even with today's sudden upsurge reversal of fortune, volume was horrid and stocks finished well off their highs, with widespread selling occurring in the final hour. That's likely because today's move was highly orchestrated by the usual suspects, with aid from the Fed (remember, QE2 isn't over yet). Bonds were flipped and turned into stock purchases, mostly in the very same names that control 80% of the trading on the exchanges. You know the names; no need to repeat them here.

Getting right down to it, after sustaining six straight days of losses, this was nothing about which to get excited, that's for sure. For instance, even factoring in today's gains, the Dow is still off a whopping 445 points since May 31, and 686 points since the top on April 29 (12,810).

Anyone suggesting that it is anything other than a one-day event should be barred from ever commenting on stocks or financial issues, in perpetuity. Selling stocks will resume sooner, rather than later.

Dow 12,124.43, +75.49 (0.63%)
NASDAQ 2,684.87, +9.49 (0.35%)
S&P 500 1,289.00, +9.44 (0.74%)
NYSE Composite 8,149.65, +68.30 (0.85%)

Internals were slightly improved, with advancing issues topping decliners, 3538-2116. The NASDAQ was good for 26 new highs and 119 new lows; the NYSE saw 31 new highs and 70 new lows, making our combined reading 57 new highs and 189 new lows, a fifth straight session with the lows leading the way.

Volume? Come on, now.

NASDAQ Volume 1,686,693,375
NYSE Volume 3,489,525,750

Over in the commodity space, the aberration known as crude oil futures gained $1.19, to $101.93. There is no good reason for the price of oil to be this high. A stable price of around 470-80 per barrel would be sufficient to satisfy all parties without putting unnecessary pressure on end-product consumers. If there's any one thing that will keep a slow economy from improving, it is high fuel or food prices and we have them both. Of course, the government, usually quick to impose its will wherever it pleases, does nothing about this. To put it simply, our elected officials at all levels have ceased representing the people of America long ago. In a few words, THEY SUCK.

Oddly enough, gold bugs saw right through the rise in equities and bought more, bringing the price up by $6.60, to $1544.40. Gold is still up 25% on the year. Difficult to argue with those kinds of returns. Silver was also bid higher, up 75 cents, to $37.55.

Tomorrow, the weekend. Thank goodness.

Stocks Continue Slide through Sixth Straight Session

Another day, another decline on US stock markets.

One should not be at all surprised by the development that stocks have found the path of least resistance to be lower. After all, they were goosed the past two years by almost $2 tillion in Federal Reserve subsidies and slippery dealings by the major banks.

Once again, stocks started out near their highs of the day, and, through a choppy session, ended in a massive sell-off into the close. The NASDAQ took the brunt of the beating, never making it out of negative territory the entire day. Again, this is unsurprising, as most of the momentum stocks which drove the two-year rally are indexed on the NASDAQ.

The bigger picture involves risk of all sorts, much of which is unquantifiable, such as the level of interest in, or general terms of, the bailout of Greece and whether or not the congressional clowns can come to some agreement on lifting the debt ceiling or not. Absent reliable information on either of those issues, and adding to the fact that there's scant economic data upon which to trade, stocks took another leg down in what is fast becoming a summer of discontent.

Perhaps the government agents and Wall Street wizards should be just happy to take their lumps in money, lest the American public come after them hammer and tong. They have destroyed not only the general economy of the nation, but have misused the public trust to a point at which there no longer is any.

The path to Dow 10,000 or S&P 1000 is likely going to be paved with the corpses of the major banks, still insolvent in many regards, especially Bank of America (BAC), which hit another tw-year low today, losing 0.11 to 10.54. Wells-Fargo (WFC), JP Morgan Chase (JPM), Citigroup (C), Goldman Sachs (GS) and Morgan Stanley (MS) all took on water, though these stocks and the averages were all aided by a futile, though furious, late rally in the final fifteen minutes of trading.

Dow 12,048.48, -21.87 (0.18%)
NASDAQ 2,675.38, -26.18 (0.97%)
S&P 500 1,279.56, -5.38 (0.42%)
NYSE Composite 8,081.33, -50.34 (0.62%)

Despite the seemingly paltry losses, internals were crushed once again, and therein lies the problem with the markets. Almost everything is still overvalued and the reversal, by fear, extends to all equities. Declining issues hammered advancers, 4824-1767. On the NASDAQ, there were 22 new highs and 140 new lows, Over on the Big Board, 23 new highs, and 97 new lows, putting our totals at 45 new highs and 237 new lows, the fifth straight win for the lows, an expanding margin of difference and a sure sign the correction has further leg-stretching to do.

Volume perked up a bit from the previous two sessions, another indication that the selling pressure is intense and not about to abate.

NASDAQ Volume 2,038,875,125
NYSE Volume 4,442,987,500

Defying all logic, crude oil futures rose $1.65, to $100.74, as OPEC nations meet in Vienna, but came to no agreement on raising production quotas. It was another rough day from precious metals speculators, with gold down $6.90, to 1537.80, and silver off 17 cents, to $36.97.

Markets may get some relief from initial unemployment claims due out prior to the market open tomorrow, but counting on that is akin to betting the Cubs will make the playoffs. Not a sound bet.

Obama Speaks, JP Morgan Pops, Stops, Feds Love Banks

Sometimes you just have to sit back and take it all in, which is precisely what marketeers did today after JP Morgan put out a bogus earnings report prior to the open, and President Obama put down a line in the sand for Republicans over upcoming budgets.

Market futures pointed higher prior to the open after JP Morgan Chase (JPM) announced 1st quarter results, saying they beat wall Street expectations of $1.15 per share with a resounding $1.28 in the quarter. This sent the major indices off to the races at the open, but as soon as discoveries were made that Morgan's earnings figure was boosted by a 0.29 per share reduction in credit loan loss reserves, things began to turn ugly, and in a hurry.

After opening up 62 points to the good, the Dow Jones Industrials were seeing red by noon. Likewise, JP Morgan's 62 cent gain turned into a 76 cent loss (45.88) at the low of the day, just after 2:00 pm EDT. By the close, Morgan and the Dow had regained some ground, though JPM still finished down 39 cents and was quoted lower in the after-hours.

Around 2:00 pm, President Obama offered a retort to Republican Paul Ryan's proposed 2012 budget plan in a speech at George Washington University. The President outlined plans for cuts in defense spending and saving in Medicare and reiterated his 2008 campaign pledge to scale back the Bush tax cuts, saying he went along with Republican plans to extend them last year only so he could save middle class taxes from rising.

Obama's plan, in simple terms plans to cut the budget deficit by $4 trillion over the next 12 years, keeping intact the two largest entitlement programs, Medicare and Social Security, which was not mentioned for any revisions.

While the president was speaking, markets gyrated in both directions, finally heading into the positive, though only slightly, by the close. At the very least, the president did a good job of setting the parameters for a budget fight that figures to be a battle royale on Capitol Hill through the summer and into the fall.

Even though the markets broke a four-day losing streak, gains were minimal, the up early, lower later signature of trading was straight out of the bear market playbook.

Dow 12,270.99, +7.41 (0.06%)
NASDAQ 2,761.52, +16.73 (0.61%)
S&P 500 1,314.41, +0.25 (0.02%)
NYSE Composite 8,367.31, +6.85 (0.08%)

Advancers took back the edge over decliners, 3493-2976, but new highs and new lows were split, with a 46-46 tie on the NASDAQ and new highs bettering new lows, 50-15 on the NYSE. Volume was, as usual, uninspired.

NASDAQ Volume 1,766,435,000
NYSE Volume 4,275,430,000

Commodities snapped back to life with WTI crude futures gaining 86 cents, up to $107.11 on the NYMEX, snapping two-days of delightful declines. Gold picked up a gain of $2.00, to $1,455.60, while silver added 17 cents to $40.24.

The budget deal worked out last Friday now appears to be ready to pass both houses without much dissent, though some members of both parties have signaled that they would vote against the measure due to ideological values. A vote is scheduled for the House on Thursday.

In other news affecting JP Morgan and its cohorts (the 14 largest US banks), federal regulators slapped the collective wrists of the banks, but imposed no sanctions, fines or plausible remedies to foreclosure and mortgage servicing problems which surfaced last fall during the "robo-signing" scandal.

The Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Reserve and the Federal Deposit Insurance Corp. issued the settlement after markets had closed.

"The review uncovered unsafe and unsound practices, violations of law and foreclosure processes geared toward speed and quantity, instead of quality and accuracy," the OTS said in a statement.

That qualifies as the understatement of the decade. Not a single banker or functionary has been indicted, nor have any of the banks in question been subject to any serious scrutiny over their abuses that likely deprived many homeowners of due process.

This "agreement" leaves conditions almost as they were, with the banks still holding all the cards and homeowners getting no relief. It is expected that foreclosures will proceed through the courts as they have, with judges scrutinizing individual cases for flawed paperwork and other transgressions routine to the practice of the banking cartel.

Without a workable framework, the process will likely bog down the real estate market for the next five to ten years, as title defects, lost notes, fraudulent assignments and other illegal practices are given a green light by the nation's regulators. Obviously, some things in Washington remain just the same, as regulators look the other way when it comes to their favorites sons and campaign contributors.

POMO Monday! Stocks Soar! BofA in the Clear!

The Fed executed a little $6.3 Billion POMO, which, as we have mentioned, is tantamount to giving the largest banks and brokerages free money with which to play the market. "Game on, dudes!" was heard in the offices of Goldman Sachs, Bank of America, et. al., about five to seven minutes into the session.

Gotta love that funny money! Let's dance!

Dow 11,143.69, +80.91 (0.73%)
NASDAQ 2,480.66, +11.89 (0.48%)
S&P 500 1,184.71, +8.52 (0.72%)
NYSE Composite 7,571.10, +50.50 (0.67%)

Up, up and away went the stock indices, with 80% of the trading being done by HTF "flash" computers using algorithms designed by NASA, DARPA or the CIA, no doubt. Advancers absolutely crshed decliners, 4249-2216. New highs bettered new lows, 440-56. Volume was on the wrong side of the toilet rim, but with the Fed pumping money into the system, and the computers all programmed to react to volume buying as a buy signal, there's almost no downside to this market, which, of course, is the whole big idea, anyway.

It's absolutely absurd, but, I would be remiss not to advise at least some jumping in at any level right now, but with the implicit understanding that stops have to be set very judiciously and that means just under your buy price. (Disclaimer: setting stops may alert the HTF computers to your trades and take them out with all due haste.)

NASDAQ Volume 1,642,727,625.00
NYSE Volume 4,996,276,500.0

It was a great day to own oil futures. The front-end contract flew ahead by $1.83 on no news or data, to $83.08. Late print on gold was up $3.40, at $1372.30. Silver also gained 11 cents, to $24.43.

Add this last bit of news to the "and you thought Usain Bolt was fast" file. Bank of America, which just announced a self-imposed halt to foreclosure proceedings in all 50 states last week, today announced that they would resume foreclosures in 23 judicial-foreclosure states. The bank says that they found NO ERRORS in the 102,000 cases they reviewed, but added that they would begin submitting new affidavits by October 25th.

Now, call me silly or just plain dumb, but why, if they found no errors, would they begin filing "new" affidavits. Just saying, if the old ones were OK, why do you draw up new ones. Incidentally, I wonder just how many people spent the last ten days reviewing these 102,000 documents, which, I'm assuming were scattered around offices in those 23 states?

If you had 1000 people reviewing those documents, they'd have to have done 100 apiece, or about ten per day. If it were 100 people, that would escalate to 100 pr day, and what kind of review could one perform at the rate of about 15 per hour?

As usual, that smells fishy to me, but what do I know? Well, I know that the nation's largest banks are rotten, crooked and exist only to separate Americans from their money and property, so excuse me if I don't buy BofA's argument that they've already undone some of their dirty work.

Not so incidentally, Bank of America (BAC) shares were up 0.36, or 3% on the day. Other major bank stocks, like JP Morgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C), were up similarly. Wells Fargo and Citgroup both posted gains in excess of 5%.

Happy daze!

Late add: Just found this nifty publishing tool, which allows you to make animated movies. Here's today's post:

Foreclosure-Gate Goes Full Monte; Stocks Soar!

Our stock markets have officially reached escape velocity today and have become permanently detached from reality.

With JP Morgan Chase CEO Jamie Dimon admitting today at his company's conference call that they no longer make use of MERS to foreclose mortgages, because lawyers contend that the system lacks the required paper trail to prove ownership.

Game, Set, Match!

This is an open admission by the head of one of the biggest mortgage servicers and foreclosure mills in the country that the system they themselves created causes breaks in the chain of title, meaning that just about every mortgage in the country written between 2003 and 2008 may be impaired as to legal, rightful ownership. Title has been clouded. Good luck foreclosing for the banks, but tough luck for homeowners current and paying, because when the time comes to sell your property, not only will it likely be worth less than what you paid, no title insurer will touch it without increased premium because your prior note will not be discharged since the legal note holder is a mystery or the actual note is MIA.

Welcome to the world of lawlessness created by moral hazard. All of this is 100% the fault of the banks, just as all previous chapters of this book of slime has been, from sloppy underwriting, to sub-prime, no-doc, no-down loans to defaults and now, no rights to foreclose.

Today, hundreds of thousands - if not millions - of Americans who haven't paid their mortgages in months, have just hit the lottery and the prize is a free house. Now, these home-dwellers can't sell the homes, but they sure can live in them, and, in the case of investor-owned homes, there's nothing precluding them from finding suitable tenants and renting them out. What a way to boost the economy. Bust up the banks, screw over the investors (who have no recourse) and let the people be. All that extra money can now go to buy iPads, toasters, clothes, toys, and just in time for Christmas!

Any mortgage that has the name MERS, as assignee or mortgagee or nominee, is likely void, as worthless as a blank piece of paper when it comes to proving ownership. Let the plaintiff's attorneys come forward and let the games - and years of intense, unstopping lawsuits - begin. The banksters just passed the attorney full employment act.

For one idea as to where this is all going, and in a hurry, here's a story about a California couple and their nine kids who, on the advice of their attorney, broke back into the home that they were recently foreclosed upon and evicted from and who are now claiming rightful ownership.

What's happening in Simi Valley today and making headlines, will become commonplace within coming weeks and months.

Now that the fuse has been lit by the banks, homeowners and non-cooperative courts, for the full implosion of the entire US economy (most of the Southwest and Southeast are already toast, along with Detroit), how has Wall Street reacted?

As stated in the opening paragraph, the minions roaming the canyons of lower Manhattan have completely divorced themselves from reality. Stocks galloped right out of the gate on the strength of the 3rd quarter earnings report from JP Morgan Chase (JPM). It didn't matter that the earnings were not very good and unimpressive, just that they came out. The signal to buy had been given by Fed head Ben Bernanke on Tuesday, via the minutes of the previous FOMC meeting, released yesterday, in which the mechanics of QE2 were thoroughly exposed.

Dow 11,096.08, +75.68 (0.69%)
NASDAQ 2,441.23, +23.31 (0.96%)
S&P 500 1,178.10, +8.33 (0.71%)
NYSE Composite 7,561.50, +71.88 (0.96%)
NASDAQ Volume 2,309,790,500
NYSE Volume 5,420,675,500

Advancing issues soared past decliners, 4313-1472. There were 738 new highs, to just 25 new lows, the widest spread since in a year. On an intra-day basis, the Dow approached the April highs, but as the day wore on, stocks began to sell off, the Dow finishing about 60 points shy of the day's high. Maybe there's some hope, though most people are still asking for a little bit of whatever it is they're smoking down on the exchange floors. Volume on the NASDAQ was solid, not so much on the NYSE.

Oil got a whiff of the fed-induced inflation soon to be visiting our shores, gaining $1.34, to $83.01, but gold stole the show, advancing $23.40, to a new record high of $1,370.50. Silver was no slouch, tacking on 79 cents (3.4%), to $23.93. WOW!

We are now certain that the end is near, with the original reptilian femme fatale, Condoleezza Rice, appearing on CNBC to tell us that confidence in America must be restored. OK, thanks, Condi, now back in your hole. And who the he-- let her out?

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.

Yes, That Was the End of the Rally

As queried yesterday, the split decision by the major indices, resulting in paltry gains and losses across the board, appears to have signaled at least a pause of optimism for the markets.

News flows were both good and bad (depending on one's perspective) prior to the open, highlighted by JP Morgan Chase (JPM) trying to get away with reporting second quarter results which included unusual one-time gains. The usual protocol is for one-time charges or gains to be stripped out, as the vast majority of analysts predict on such a basis.

The Financial Times reports that JPM's earnings "Signal end of Wall St. rebound" and even Wall Street darling CEO Jamie Dimon couldn't get away with reporting $1.09 per share, when analysts were seeking 70 cents, excluding one-time charges. JPM decided to pad earnings by lowering their loan-loss reserves by $1.5 billion. Stripping those out, the venerable House of Morgan made 75 cents per share in the quarter, though there were likely other crafty accounting tricks employed.

For their efforts, investors sold off the nation's second-largest bank to the tune of a little more than a point at the lows of the day. When all was said and done, however, and the Wall Street connivers couldn't stand a little decline, all stocks were boosted in a furious final half-hour, which saw the Dow gain about 70 points and JP Morgan close 11 cents higher on the day, closing at 40.46.

The final push was attributed to passage of the long-overdue Financial Regulation bill by the Senate, but stocks finished mixed again. As the Dow and NASDAQ finished higher on Wednesday, today's two winners were the S&P 500 and NYSE Composite, a complete reversal. So, for the past two days, all the markets did was vaporize a lot of money.

Also prior to the open Initial jobless claims for the week reportedly totaled 429,000, down 29,000 from the previous week. Following last week's precipitous drop, continuing claims climbed by almost 250,000 to 4.68 million. Separately, the Producer Price Index (PPI) for June fell 0.5% month-over-month, another sure sign that deflation is well-entrenched.

The NY Fed Empire Manufacturing Index fell to 5.08 in July, from 19.57 in June, a seven-month low.

Industrial production gained 0.1% in June, while Capacity Utilization stalled out at 74.1% over the same span. All of these indicators cause stocks to sell off at the open, but career further and deeper into the red after 10:00 am when the Philadelphia Fed announced that their manufacturing index fell from 8.0 in June to 5.0 in July.

If there isn't a double-dip or recession headed our way, you sure can't tell it from the spate of negative statistics sprouting from every corner of the economy.

Dow 10,359.31, -7.41 (0.07%)
NASDAQ 2,249.08, -0.76 (0.03%)
S&P 500 1,096.48, +1.31 (0.12%)
NYSE Composite 6,916.81, +13.45 (0.19%)

Decliners again led advancing issues, 3601-2789, and new highs remained ahead of new lows, 172-71. Volume was weak, owing to the uncertainty of the marketplace.

NASDAQ Volume 1,980,588,625
NYSE Volume 5,214,455,500

Crude oil sold off, losing 66 cents, to $76.62, but gold was higher once more, up $1.30, to $1,208.10. Silver gained 7 cents, to $18.35. All traders in commodities are due for a rude awakening at some point, when deflationary forces can no longer be contained and demand eventually falls off a table. Those not in cash (unlike myself and ardent followers of this blog) should begin shedding all semi-liquid assets, including futures contracts, as all signs point to a resumption of the bear market, though this time bottoms could be severe - far lower than expected.

After the final bell, Google (GOOG) was ravaged as it missed analyst expectations of $6.52, by seven cents, or $6.45 per share. To understand the absurdity of Wall Street, one must realize that Google is among the most profitable companies in the world. GAAP operating income (revenues after expenses) was $2.37 billion, which is a pretty good sum of money for any three-month period. Nonetheless, some traders saw fit to wallop the stock down more than 20 points in after hours trading, or, by more than 4%.

Maybe it was a touch overvalued at $494 a share, or, 22 times earnings. Live and learn.

This earnings season can't be over with already, can it? We've just gotten started. There are sure to be wild gyrations tomorrow on options expiration and over the next two weeks, which will only be fun if you're winning.

Got Bank Stocks? Sell Them on Monday.

Ever since the financial meltdown - which actually began in August of 2007 (Trust me, I'm a doctor.) when the Primary Trend in the Down Jones Industrials turned from a bull to a bear - the banks have gotten a lot of attention. Many of us do our banking at either a locally-owned bank or a friendly Credit Union. If you're smart enough to have made the decision to keep your money out of major national banks, good or you.

The too-big-to-fail national banks - Bank of America, Wells Fargo, Citigroup and JP Morgan Chase - also known as money center banks, are the main reason for the economic calamity which still grips this country, and to a lesser extent, the rest of the world. These were the ones engaged in all that risky behavior with sub-prime mortgages, credit default swaps and, more recently, the bailouts. Add to them Goldman Sachs and Morgan Stanley and you have the gang of six which nearly brought down Western capitalism as we know it.

Two of their brethren - Bear Stearns and Lehman Bros. - could not be saved, and were more than likely swallowed up more or less whole to hide the extent of the fraud, inside dealings, manipulations and other horse-trading that was so widespread during the late 90s and though the first years of the new millennium. What's troubling is that they are nowhere near out of the woods. The four big banks mentioned above are nearly insolvent. Only free money from the Federal Reserve, in the form of overnight loans at just about ZERO percent, has kept them from complete collapse. They are still poring though the toxic assets on their books, hiding and keeping off market millions of foreclosed homes and struggling to stay in business.

In case you're unaware of the ongoing problems with the big banks, just consider: JP Morgan's provision for credit losses totaled $7.28 billion during the fourth quarter.

That's about all you have to know... well, and that the other banks will report similar losses. Somehow, through financial alchemy which only the banks can perform, JP Morgan Chase posted a 4th quarter profit. Let's face it, They're full of brown stuff. Credit card delinquencies were at 8.64% in the 4th quarter. People are defaulting on credit cards at an historic rate. They're also walking away from homes in droves, many of them because they are upside-down, in other words, the amount of the mortgage exceeds the fair market price of the home.

Without work and with mortgages higher than the value of their homes, the latest trend is to make a strategic default, either through bankruptcy or by just failing to make mortgage payments, leading to the eventual foreclosure. This is what's known as a self-reinforcing feedback loop. The more home prices fall, the more people default, leading to more foreclosures and lower prices again. Soon enough, it's going to become cheaper to rent than to own as vulture landlords scoop up the foreclosed properties at a fraction of their value and rent them out to strapped, credit-less former homeowners.

The banks will never survive the onslaught of foreclosures that are due to escalate once again this Spring. Common practices by the banks now are to offer buy-downs, short sales, loan modifications and extensions in order to avoid foreclosure. Once a property is foreclosed upon, the banks are on the hook for the upkeep of the property and the taxes. With homes in some areas sitting on the market for a year to two years, eventually selling for much less than the foreclosed value, the banks are in a tough spot and doing all they can to prevent foreclosure, a lengthy, expensive process which seldom produces a positive result.

Eventually, in a foreclosure, the bank gets the property, the homeowner is put out and the vacant property deteriorates, leading to further losses. There are numerous reports, especially in the Northeastern "rust belt" of banks starting foreclosures but never finishing the process. Homeowners, thinking they have to bail, leave the property, only to receive tax bills later on, because the bank did not proceed with the sheriff's sale.

The whole mess is not going to end soon or well. It's going to take 6-10 years for the banks to work off the excesses of the sub-prime credit expansion. In The meantime, property values and interest rates will remain at historically low levels. If you own shares of any of the aforementioned banks, you should dump them if you haven't already. In fact, with the market close to highs, today could have been a warning shot for further declines to come. The economy continues to stumble along and eventually, the stock wizards will get out of the way, Government bailouts and stimulus have only paved the way for another round of declines in the stock market and in prices generally.

Dow 10,609.65, -100.90 (0.94%)
NASDAQ 2,287.99, -28.75 (1.24%)
S&P 500 1,136.03, -12.43 (1.08%)
NYSE Composite 7,356.79, -91.73 (1.23%)

Losers beat winners by a wide margin, 4664-1864; there were still 340 new highs, to just 44 new lows. Volume was substantially better than it has been all week. Uh, oh.

NYSE Volume 5,426,332,500
NASDAQ Volume 2,662,195,750

With the dollar stronger, oil took a nosedive, losing $1.44, to $78.00 (still too high). Gold lost $12.00, to $1,131.00. Silver was down 22 cents, to $18.44. The pause in the rise of the precious metals may be signaling a buy. If the economy worsens, the dollar should weaken (though as gauged against other currencies, some of which aren't doing very well themselves, the dollar may just waffle around), sending gold and silver higher. Even if the dollar doesn't lose value, the metals may still be the play as more and more people look for their perceived safety.

Tip for the day: Go to a coin dealer and buy a common silver dollar, or, as many as you can reasonably afford to put away for a couple of years. It's a near-certainty they'll be worth just as much or more in 2012. You can't say that about any other asset class, except maybe bonds.

Ending String of Advances, Markets Lower Ahead of Fed

Was Monday the top?

A day after reaching 14-month highs, stocks trended lower on Tuesday on inflationary PPI data (+1.8%, more than double the predicted rise) and a strengthening US Dollar.

It was a confusing day fro traders in everything from stocks to currencies to commodities as markets moved in unusual directions in relation to each other. Oil managed to post its first gain after nine straight sessions in the red, while stocks broke a string of five straight winning sessions. Gold and silver fought against the flat line all day long.

Other economic news items sent mixed messages. The Empire State manufacturing index suffered a steep decline, dropping to a level of 2.55 in December after posting a figure of 23.51 in November. Nationally, capacity utilization continued to improve, up to 71.3% in November, following a reading of 70.6% in October.

Meanwhile, fears of more banking capitulation in Europe took on new meaning as Austria nationalized a major regional bank overnight.

Also weighing on the market was the issuance of more than $50 billion in new stock hitting the markets, stemming from the repayment of TARP funds by Bank of America, Citigroup and Wells Fargo. The idea that the market could sustain itself with so much new paper on the street without as much as a hiccup stoked the backs of the bulls. Shares of major banks, including Dow components JP Morgan Chase (JPM) and Bank of America (BAC) fell sharply during the session, however.

Struggling through most of the day in the red, the major indices slumped to intra-day lows in the final hour even though the losses were somewhat compromised by the release of comments from Fed Chairman Ben Bernanke with less than 15 minutes left in the trading day. Those comments, obviously timed to prevent a major sell-off prior to tomorrow's FOMC policy statement, cut the losses on the Dow by about 1/3. Nonetheless, stocks finished near the lows of the day with many investors seeking clarity on a range of issues from inflation to whether China would continue buying US treasuries.

Dow 10,452.00, -49.05 (0.47%)
NASDAQ 2,201.05, -11.05 (0.50%)
S&P 500 1,107.93, -6.18 (0.55%)
NYSE Composite 7,141.44, -45.05 (0.63%)

Market internals were clearly bearish. Losers beat winners, 3993-2529. New highs continued to outpace new lows, though by a margin less than Monday's extreme, 423-70.

NYSE Volume 5,604,492,500
NASDAQ Volume 1,921,278,875

Crude oil for January delivery was up $1.18, to $70.69. Gold lost $1.10, to $1,122.70, while silver gained 13 cents, to $17.47.

There was more than enough conflicting data and news to confound investors, and, if markets hate anything, it is uncertainty, of which there was an oversupply.

The avalanche of data will only worse on Wednesday, with November CPI, building permits, housing starts and the Treasury's current account balance on tap prior to the opening bell. Shortly after 2:00 pm, the Fed is expected to keep interest rates steady, though the statement wording will be closely watched for signs that the central bank may be considering raising rates.

It seems that the Fed has already tipped its hand concerning the all-important statement, not wanting to destroy the rally so close to Christmas. There's something to be said about Fed Chairman Bernanke: he definitely does not want to take away the punch bowl at the height of the party, but eventually that is what he will be forced to do. In the meantime, Treasuries have been rising over the past two months, which should serve as signal enough for investors that the top may already be in for stocks, or, at the very least, very close.

Wall Street has had a phenomenal year, considering how it began. Whether the markets will sustain themselves though the end of the year will be partially answered tomorrow after 2:00 pm.

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.

What's in Your Wallet? Not Much, Says Capital One

I'm not sure, but probably more than 30% of all adult Americans have a Capital One credit card. I used to have two, before the company - kicking and screaming all the way - finally acceded to my demands to combine them into one.

While checking some financial sector stocks earlier today, I noticed that Capital One (COF) has taken a hellacious beating this year. Since closing at 31.05 on December 31, 2008, the stock has received a 67% haircut, down to 10.13. Capital One is the nation's largest purveyor of individual credit cards, but also dabbles in making new car loans, home equity loans and other, similarly risky endeavors.

The company is notably the subprime credit lender of nearly last resort to consumers who have tapped out their home equity and are now piling up credit card debt, typically at rates of 15% and higher, and now it appears that many are not paying back their lender, as Forbes reports:

The company also reported its annual net charge-off rate a measure of credit default, for U.S. credit cards rose to 7.82% in January from 7.71% in December.

Apparently, when it comes to paying their debt to Capital One, there really isn't much left in people's wallets, much to the displeasure of COF shareholders, as the company wiped out all of the year's gains in 2008 with a 4th quarter loss of $3.74 per share.

Much of Wall Street was sharing the pain with Capital One, as stocks took yet another drubbing, with the Dow falling to within a whisker of the November 20 low (7552.29), closing right at the lows of the day, 7552.60.

This sets the stage for an interesting remainder of the week, as today's close is undeniably a double bottom on the Dow. The other majors are close to their previous lows, but not quite there.

Dow 7,552.60, -297.81 (3.79%)
NASDAQ 1,470.66, -63.70 (4.15%)
S&P 500 789.17, -37.67 (4.56%)
NYSE Compos 4,939.12, -267.64 (5.14%)

The NASDAQ has another 154 points to go, the S&P would have to shed another 36 points and the NYSE Composite is still 288 above its November 20 close. Obviously, the bank and financial stocks of the Dow have weighed heavily of late.

Bank of America (BAC) crossed the $5 Rubicon again, closing at 4.90, down 67 cents. CitiGroup (C) continued down the rat hole, losing 43 cents, to 3.06. even venerable JP Morgan Chase (JPM) lost 3.04, to 21.65. Each of those company's shares were down by more than 12% on the session.

Market internals verified just how rough a day it was for US stocks. Declining issues absolutely slammed advancers, 5803-775. New lows expanded to 555, versus a paltry 18 new highs. Volume was outstanding, signaling more selling dead ahead. Only one issue of the Dow 30 closed with a gain: Wal-Mart (WMT). For more on that, see below.

NYSE Volume 1,590,783,000
NASDAQ Volume 2,395,914,000

Commodities were split down the middle. Anything consumable, from unleaded gas to pork bellies, was down, while the precious metals shot to short term highs. Crude oil for March delivery were down $2.58, to $34.93; natural gas was off 22 cents, to $4.22, and wholesale unleaded gas closed at $1.11, begging the question as to how most consumers are paying roughly $2.00 at the pump. Look for another record quarter for the oil companies.

Gold gained $25.30, to $967.50. Silver broke 39 cents higher, to $14.01. With deflation clearly the issue, one has to wonder how far the bulls will push the metals. They are, after all, investment hedges - primarily against inflation - but commodities at heart.

Investors find themselves at a critical crossroad at the open tomorrow. Considering that only the Dow has retraced its low, it should be a pretty safe bet that all indices are heading lower in the short term.

Want to know why Wal-Mart was the only Dow component to show a gain on the day? Watch the video below: