Showing posts with label Morgan Stanley. Show all posts
Showing posts with label Morgan Stanley. Show all posts

Monday, October 29, 2018

Massive Market Crash Sends Dow Into Correction Before Last-Minute Save

Monday's rapid rise at the opening bell turned to a massive selloff as the session progressed, prompted by a self-fulfilling note from Morgan Stanley chief strategist, Michael Wilson, that emerged around 1:00 pm ET, calling the current market turmoil more secular in nature rather than the "cyclical" call that most Wall Street analysts have been making.

The Dow and other major averages were sent off like fireworks at the open, but stalled in early trading, beginning their descent just after 10:00 am ET. The Dow topped off at 25,040.58 and continued lower, finally bottoming out at 24,122.23, an intra-day loss of more than 900 points, top to bottom. With just 15 minutes left in the trading session, short-covering took the Dow up more than 300 points, eviscerating more than half of the day's losses.

As for percentages, the Dow today actually was sent down just over 10% on both a closing and intra-day basis form the October 3rd all-time high. Intra-day, the Dow topped out at 26,951.81 before closing at 26,828.39. That puts the 10% correction mark at 24,256.63, intra-day, and 24,145.55 on a closing basis, both of which were exceeded today, though the closing number avoided a clear-cut entry into correction.

As for the benchmark S&P 500, today's close was 9.8% lower than the September 20 closing high of 2930.75. For those who like round numbers, that would qualify as being close enough, especially since the S&P bottomed out at 2,603.54, well below the number necessary to call it a correction. That index was down more than 55 points prior to the late-day rescue, finishing with a modest 17-point decline.

The NASDAQ and Dow Jones Transportation Index, both already well into correction territory, suffered even more losses on the day.

In agreement with Morgan Stanley's Wilson, there's growing evidence that what stocks are undergoing is anything but cyclical in nature, despite Friday's advance reading of third quarter GDP coming in at a rosy 3.5%. It's worth noting that the most recent quarter's growth was less than the second quarter's 4.2%, and that the first estimate is often revised lower in subsequent months, as data becomes more well-defined. Additionally, the third quarter figures were goosed higher primarily by consumer spending rather than business capital expenditures (CapEx), which were moribund.

For those of bullish sentiment, one has to consider just where markets are supposed to go when unemployment is at historic lows and the stock market is at historic highs, more than nine years into the longest bull market expansion in stock market history.

Proponents of Dow Theory (and the Elliott Wave) need only to look at a one or three-month chart to surmise that the Dow and the Transports have signaled a primary trend change - bullish to bearish. The Dow fell sharply from October 3rd to the 11th, rallied meekly through the 16th and puked it all up (or down, as the case may be) to current levels. The transports had already completed the four-step top-bottom-recovery-lower bottom prior to today's disaster, although it's all-time high was back on August 29.

The not-so-wild cards in the current scenario are the Fed's relentless assault on the federal funds rate, furiously raising a quarter point per quarter, inflation fueling via Trump's trade tariffs, and the stubbornness of wages to do anything but stagnate. It's a potpourri of potential pitfalls that are hard to ignore.

Like housing prices prior to the sub-prime crash, stock valuations do not always go up. This time is not different, and, judging by the frantic closing activity today, tomorrow could be a fully-loaded house of pain.

Unless the Dow rallies over the next two days, Octobers cumulative loss is looking to exceed the February and March losses combined.

And so it goes. Markets are cyclical and sometimes, secular. The latest days of trading feel like sometime has arrived.

Incidentally, today is the anniversary of Black Tuesday, October 29, 1929. Could that wicked buying in the final fifteen minutes have been an attempt to prevent history repeating?

Dow Jones Industrial Average October Scorecard:

Date Close Gain/Loss Cum. G/L
10/1/18 26,651.21 +192.90 +192.90
10/2/18 26,773.94 +122.73 +315.63
10/3/18 26,828.39 +54.45 +370.08
10/4/18 26,627.48 -200.91 +169.17
10/5/18 26,447.05 -180.43 -11.26
10/8/18 26,486.78 +39.73 +28.47
10/9/18 26,430.57 -56.21 -27.74
10/10/18 25,598.74 -831.83 -859.57
10/11/18 25,052.83 -545.91 -1,405.48
10/12/18 25,339.99 +287.16 -1,118.32
10/15/18 25,250.55 -89.44 -1,207.76
10/16/18 25,798.42 +547.87 -659.89
10/17/18 25,706.68 -91.74 -751.63
10/18/18 25,379.45 -327.23 -1,078.86
10/19/18 25,444.34 +64.89 -1,013.97
10/22/18 25,317.41 -126.93 -1,140.90
10/23/18 25,191.43 -125.98 -1,265.88
10/24/18 24,583.42 -608.01 -1,873.89
10/25/18 24,984.55 +401.13 -1,472.76
10/26/18 24,688.31 -296.24 -1,769.00
10/29/18 24,442.92 -245.39 -2,014.39

At the Close, Monday, October 29, 2018:
Dow Jones Industrial Average: 24,442.92, -245.39 (-0.99%)
NASDAQ: 7,050.29, -116.92 (-1.63%)
S&P 500: 2,641.25, -17.44 (-0.66%)
NYSE Composite: 11,942.15, -34.79 (-0.29%)

Friday, February 3, 2017

What Wall Street Wants, Wall Street Gets; Trump Slashes Dodd-Frank

There's no better way to put it than to say that the Wall Street banks - Goldman Sachs, Bank of America, JP Morgan Chase, Morgan Stanley, Wells Fargo, and Citi - have Donald Trump's "get out of jail free" card in their back pockets.

Today's action by the President, an executive order slashing most of the regulations put on banks by the Dodd-Frank act under past-president Obama and the useless congress, paves the way for even looser regulations and more wild risk-taking by Wall Street.

And the celebration got underway right after the stupid BLS jobs report and the opening bell, boosting all major averages to within spitting distance of all-time highs.

Should anyone wonder if Mr. Trump knows anything about economics, one has only to look at his Treasury nominee, Steven Mnuchin, who led a group of investors in the take-out of IndyMac, later changing the name to OneWest while it became a serial abuser of mortgage financing and foreclosure laws.

While the former Goldman Sachs partner is not yet assured of passing muster in Senate confirmation, the appearance of yet another Goldman alumnus at the top finance job in the administration should be all one needs to know. Trump has long-standing associations with Wall Street, Goldman Sachs and financiers in general, so it isn't really a surprise.

Business will do business, whether or not it's moral, fiduciary, or based upon sound best practices. Wall Street retained control when Trump was elected, and would have even with Hillary as the president, so there's a bit of a silver lining in that at least the office of the president isn't occupied by a serial liar and psychopath. President Trump is better than the alternative, probably by more than anyone imagined.

After all the whipsaw activity of the past week, the major indices ended relatively unchanged. So, jobs data, the Fed, Trump, the EU, Japan, and the UK central bankers didn't actually add up to much at all.

Caveat Emptor

Carry on and Mind the Gap.

At the Close, Friday, February 3, 2017:

Dow: 20,071.46, +186.55 (0.94%)
NASDAQ: 5,666.77, +30.57 (0.54%)
S&P 500: 2,297.42, +16.57 (0.73%)
NYSE Composite: 11,311.74, +96.36 (0.86%)

For the Week:
Dow: -22.32 (-0.11%)
NASDAQ: +5.98 (0.11%)
S&P 500: +2.72 (0.12%)
NYSE Composite: +27.52 (+0.24%)

Wednesday, March 11, 2015

Stocks Try Rally, Fade Late; 28 of 31 Financial Institutions Clear Stress Tests

After yesterday's huge downbeat, investors and speculators were hopeful for some upside momentum, or, at least, a dead cat bounce.

Well, the cat bounced, but it turns out it was made of glass, as the major indices could not maintain gains, even though Europe was ecstatic over the second round of QE-Euro, with the ECB scooping up whatever dribs and drabs of debt they could find (liquidity is an issue).

One of the dullest sessions of recent memory was punctuated by bank stocks, which were mostly higher by one or two percent, in advance of the second round of Fed-mandated stress tests, which would determine the readiness of the TBTF banks to offer dividends and return to shareholders.

The results of the tests, released at 4:30 pm EDT, showed that 28 of 31 of the major financial institutions subjected to the Fed's nanny-ism, submitted capital plans that passed muster. The three which failed, were Santander, Deutsche Bank and Bank of America, the last of which must re-submit its plan by the end of the third quarter.

Largely, the tests allowed those which passed to increase dividends and engage in the latest Wall Street scam, repurchasing of shares. To that point, Morgan Stanley (MS) will repurchase $3.1 billion of its own shares; other banks had similar ratios.

Beyond the moribund inter-workings of major financial institutions, what moved markets on the day were dollar strength and euro and yen weakness. The dollar is at its strongest valuation against other currencies in over a decade, while the Yen and Euro are hitting 12-year lows against the greenback. The euro is approaching parity with the dollar, trading in the 1.05 range.

Also of note was the first quarterly report of Wall Street darling Shake Shack, which is trading at some ungodly valuation like $700 million per store. The SHAK returned a five cent loss per share for its most recent quarter. Shake that.

Dow 17,635.39, -27.55 (-0.16%)
S&P 500 2,040.24, -3.92 (-0.19%)
NASDAQ 4,849.94, -9.85 (-0.20%)

Tuesday, May 22, 2012

Stocks Slide Late After More Evidence of Greek Exit from Euro Spooks Markets

The headline really says it all on today's turnaround Tuesday.

With the major averages putting in a nice follow-up to Monday's lift-off, the major indices were set to put in their second winning day in a row. The Dow was sporting a 50-point advance just after 3:00 p EDT when word came out of Greece by former Prime Minister Lucas Papademos, saying that preparations for an exit of Greece from the Euro zone are being considered, and said the scope to renegotiate the ongoing EU and IMF loan program would be "very limited."

That's when a 50-point gain became a 50-point loss in a matter of minutes, though all of the major indices recovered to end the session nearly unchanged.

Overnight, this news will likely sink in a little further and it would be expected that Asian and European market would open tomorrow lower. As word of Papademos' statement spread, the worst victim was the Euro, which fell below 1.27 to the dollar on foreign exchanges.

It is fascinating to watch how this entire Greek drama is being played out, especially in reference to market response. As event have unfolded over the past year to 18 months, market reaction has become one of initial knee-jerking, followed by bouts of disbelief and buying into the dips, though as the situation has turned from bad to worse in Greece, stocks seem more inclined to shrug off any bad news, whereas, earlier, like in September of last year, markets took violent, hefty swings on dispatches from the continent.

What will occur in global markets when the Hellenic state is finally on its own again and officially dismissed from the Eurozone - now a 90% chance according to most euro experts - is anybody's guess, though most investors are girding for the worst case, reminiscent of the Lehman breakdown back in '08, though this time around, there's been plenty of time to prepare.

The other major story of the day concerned Facebook, as the NASDAQ continues attempts at cleaning up the mess that they created. Due to technical issues in their electronic trading system, as of Tuesday morning, some investors still had not received confirmation of their trades and the NASDAQ was talking about raising its own loss provision for bad trades from $3 million to $13 million, as trading desks and market makers toll their losses.

It was also revealed today that Morgan Stanley's analysis arm had downgraded the stock just prior to the IPO, another odd and damaging situation, given that Morgan Stanley (MS) was the lead underwriter on the deal. The firm, by law, is supposed to have a "Chinese wall" between analysts and underwriters, but one has to wonder if the firm was shorting the IPO a la Goldman Sachs. The situation will be investigated, though it's highly doubtful that anything will come of it, in as much as the trades were such a convoluted mess one wonders if officials will ever be able to untangle the mess.

Facebook closed the day at 31.00, a full seven points below Friday's IPO price, with a loss of 3.03 (8.90%). Founder and CEO, Mark Zuckerberg, who was supposed to have bankrolled $18 in paper profits on the public opening of the company, may have to just suffer through life with a measly $15 billion.

Yep, life sure is tough.

Dow 12,502.81, -1.67 (0.01%)
NASDAQ 2,839.08, -8.13 (0.29%)
S&P 500 1,316.63, +0.64 (0.05%)
NYSE Composite 7,532.32, -10.66 (0.14%)
NASDAQ Volume 1,755,814,375.00
NYSE Volume 4,056,273,750
Combined NYSE & NASDAQ Advance - Decline: 2522-3114
Combined NYSE & NASDAQ New highs - New lows: 45-113
WTI crude oil: 91.66, 0.91
Gold: 1,576.60, -12.10
Silver: 28.18, -0.14

Thursday, January 19, 2012

Amazing Stock Market Rally Rolls Along

One of the oldest adages of stock market investing is the time-honored, "the markets can remain irrational longer than you can remain solvent," or something to that effect.

This is particularly poignant in the midst of the current Wall Street "melt-up" which has been ongoing since the middle of December and shows little sign of letting up.

While corporate earnings continue to flow, the latest being from two big banks, Morgan Stanley (MS) and Bank of America (BAC), both of which met or exceeded expectations, though the accounting tricks and tactics employed by the mega-banks leave much to the imagination.

As far as Bank of America is concerned, their beat of expectations of 13 cents per share with a reported 15 cents included a bunch of one-time items and useful reserve and loan loss calculations, embedded deep within their monstrous 110-page quarterly report. Despite the discrepancies in the quarterly, Bank of America bounced higher again today, closing at 6.95, a 15 cent gain, after popping above $7 per share for the first time since Warren Buffett invested $5 billion in the bank in early 2011.

Morgan Stanley actually lost money for the quarter, but lost quite a bit less than expected. The firm’s net loss was $250 million, or 15 cents a share, compared with profit of $836 million, or 41 cents, a year earlier. The consensus expectation was for a loss of 57 cents per share. Traders took the data in stride, boosting the stock to its highest level since October. In this case, even P.T. Barnum would be proud, noting that "there's a sucker born every minute." All the better for momentum chasers in this beat-up financial.

There was a dose of economic data that surprised some and annoyed others, notably bearish investors. Initial unemployment claims came in at a sparkling 352,000 - the lowest number in months - after last week's upwardly revised 402,000. The unemployment figures continue to be a topic of some debate, in that the "seasonally-adjusted" model used by the BLS seems to have forgotten that December was holiday season, chock full of part time and temporary hires. Whatever the case, traders seemed less-than-satisfied with the numbers, as the markets began slowly but ground slowly higher through the session.

December CPI came in flat, after yesterday's -0.1% drop in the PPI, sparking fears of "disinflation" (a Federal reserve governor term) or deflation, the bogey man that haunts Fed chairman Ben Benanke.

Housing starts and building permits were flat to lower, though new home builders have been leading this rally, up more than 10% as a group since the first of the year.

How much longer can the rally last? Tomorrow being options expiration, one would think a major sell-off is in the cards for either Friday afternoon or Monday, though, as stated at the top of this piece, rationality is generally not a hallmark of recent rallies.

If you've not already taken part in this wild market ride, it may be a little late. Stocks are getting extremely overbought, as the advance-decline and new highs vs. new lows figures have been telegraphing lately.

Adding to the upside has been the unusually quiet tones coming out of Europe, as opposed to the rather hysterical daily dispatches that typified the latter half of 2011. Nothing's really changed over there, except perception, perhaps. Europe is mostly headed for a recession, which will hit the middle classes, though Greece, in particular, in already in the throes of a fiscal straightjacket which some might say is emulating a full-blown depression. To the Greeks, most of europe is saying "pay up," to which the Greeks respond with "shut up" or some other suitable and more demonstrable phraseology.

The long and short of it, if one is of the camp that believes a strong stock market is a proxy for a strong general economy, 2012 is shaping up to be a banner year or at least a good effort at kicking the can of economic woes down the road until after the elections in November.

Throwing a bit of cold water on the rally parade, as expected, Eastman Kodak (EK) filed for bankruptcy protection today, and Republican presidential nominee hopeful Mitt Romney has been found to have a number of accounts and holdings in off-shore banks, notably in the Cayman Islands, setting the stage - if he's the nominee - for a battle of ideologies between him as the ultimate one percenter and President Obama as the champion of the 99%.

While that may make for great TV, it's hardly honest, as President O'banker is about as 1% elitist as one can get without actually admitting to it.

Dow 12,625.19, +46.24 (0.37%)
NASDAQ 2,788.33, +18.62 (0.67%)
S&P 500 1,314.50, +6.46 (0.49%)
NYSE Composite 7,819.36, +52.41 (0.67%)
NASDAQ Volume 1,974,862,250
NYSE Volume 4,442,754,500
Combined NYSE & NASDAQ Advance - Decline: 3454-2119
Combined NYSE & NASDAQ New highs - New lows: 261-26 (yes, 10-1 is a bit extreme)
WTI crude oil: 100.39, -0.20
Gold: 1,654.50, -5.40
Silver: 30.51, -0.03

Thursday, December 15, 2011

Despite Positive Data, Market Rally Fizzles; Something About Ties Is Untrustworthy

You might as well call this a down day for the US markets.

Stocks were up at the open on some positive economic data, but, thanks to Christine Legarde, head of the IMF, the fear of Europe sent traders scurrying for the sell buttons.

Hop-scotching the Headlines (trust, this will all tie together):

Initial unemployment claims reached a level not seen in 3 1/2 years, falling to 366,000, though, as expressed in a post a few days back, government numbers may not be the most trustworthy. Unadjusted figures totaled 433,287 in the week ending December 10, a decrease of 95,506 from the previous week, which implies that last week's numbers may have been abnormally LOW. Some people are paying attention to the unadjusted, non-politicized data.

PPI for November was up 0.3%. Core PPI was up 0.1%. No surprises there.

The NYS Manufacturing Index came in at 9.53 for December, a dramatic rise from November's reading of 0.61. Similarly, the Philadelphia Fed's index read at 10.3, a majestic rise from November's 3.60. Those were somewhat of a surprise, though the data is supplied by the Federal Reserve. Trust them? Maybe. Maybe not.

Industrial Production: -0.2%; Capacity Utilization was 77.8%. Both of those figures were fairly static.

So, the markets opened with healthy gains until Lagarde, on her megaphone from Europe, said that no country was immune from Europe's crisis and that the outlook for the world economy was "quite gloomy." Her words. She's not very funny, which, being French, partially explains why French people think Jerry Lewis is a comic genius.

(In a conversation with a postal employee today, I joked that maybe I was getting so many orders from Europe lately because they want to spend their Euros before they become worthless. I may be on to something.)

No matter what, Lagarde's comments put the markets into a tailspin, from which they did not recover. Stocks ended the day down about 60% from their highs. It was not pretty, nor exciting. Volume was, using CNBC's Bob Pisani's word, "anemic."

Morgan Stanley plans on cutting 1600 jobs, which is about 3% of their workforce. That's limited in comparison to other cuts in the finance business. Globally, more than 200,000 wheeler-dealers are going to be slashed, downsized and dumped.

Freddie Mac (the firm which paid Newt Gingrich over a million dollar in consulting fees) says that mortgage rates have hit all-time lows, with 30-year fixed loans at 3.94 and 15-year fixed at 3.21, but, nobody's buying.

Really, nobody. The National Association of Realtors is going to revise existing home sales for the past five years, dating back to 2007 (incidentally, when the real estate boom went bust) on Hanukkah, which is December 21. If that's just bad timing on their part, well, Happy Hanukkah! But, but, but, maybe we can't trust numbers supplied by realtors, either. Add them to bankers, accountants, government officials, meteorologists (yes, the National Hurricane Center said recently that their last 20 years of forecasting seasonal hurricanes was rubbish. Look it up. ON BING.), judges and lawyers. Oddly enough, all of these types wear ties when they're working. As far as can be told, none of them sleep naked, either. Very strange.

In a grossly under-reported story, OPEC ministers set a production ceiling of 30 million barrels a day, which begs the question about oil prices in the $90+ per barrel range. There's enough and demand is slack. It should be cheaper and it got cheaper today.

And just in case anyone hasn't noticed, tomorrow is December options expiry, which usually implies a massive ramp up in prices for stocks leading into it, but, but, but, stocks have been getting beaten down mercilessly for the past week. Is that bullish? Probably not.

Oh, and the CME group wants to know where that missing money from MF Global (Does the MF really stand for that vulgar ghetto slang term? Probably.) is. Top executives of the firm are suing Jon Corzine and other top executives of MF Global for undisclosed amounts and damages. They are seeking class action status. According to Business Insider, the brainchild of former Wall Street analyst Henry Blodget (who wears a tie, but can probably be trusted since he is barred from all Wall Street trading and "official" analysis and probably sleeps naked on occasion) the suit was filed a week ago, on December 8, and nobody noticed until today.

So, that's what moved US markets today, except that the level of fear on Wall Street is probably at a point so high that Charlie Sheen, even on his finest cocaine-and-liquor float, couldn't get up there.

Psst, wanna buy some stocks?

Dow 11,868.81, +45.33 (0.38%)
NASDAQ 2,541.01, +1.70 (0.07%)
S&P 500 1,215.75, +3.93 (0.32%)
NYSE Composite 7,217.12, +32.37 (0.45%)
NASDAQ Volume 1,750,499,375
NYSE Volume 3,767,349,000
Combined NYSE & NASDAQ Advance - Decline: 3399-2200
Combined NYSE & NASDAQ New highs - New lows: 72-179
WTI crude oil: 93.87, -1.08
Gold: 1,577.20, -9.70
Silver: 29.27, +0.34

Tuesday, September 27, 2011

Rally Fades After Euro Rift is Exposed; Prepare for Third Quarter Earnings Bloodbath

US markets for equities and commodities have been held captive for the better part of the past three years - by high frequency traders, insiders with more knowledge (and money) than the general public, uninterrupted meddling by the PPT or other quasi-government agencies, but mostly, for the past nine to twelve months, by news from the Euro-zone.

It seems like every day there is a different story coming out of Europe concerning the debts of various nations and how the ECB, EIB, EFSF or any of a multitude of alphabet-soup acronyms react and intend to dispose of or attempt to solve the problem of the day. Today was no different as a late-session story from the Financial Times killed off a perfectly good short-covering, end of month window dressing rally inspired by absolutely nothing.

Stocks had been rolling along after a massive gap-up at the open, with the Dow ahead by as many as 325 points, but everything did an abrupt about-face when news erupted from Europe around 3:00 pm EDT over a rift between the nations aligned to bail out Greece - again.

According to the Wall Street Journal's story:
Stocks pared gains in the final trading hour after the Financial Times reported a split has opened in the eurozone over the terms of Greece's second bailout package. As many as seven of the bloc's 17 members are arguing for private creditors to swallow a bigger writedown on their Greek bond holdings, the FT said, citing senior European officials.

That was enough to finish off all the naked enthusiasm for the day and send stocks reeling into reverse. Though the averages finished the day with healthy gains, the froth at the top - and middle - were blown off by one story concerning something everybody already knows is a financial disaster, the continuing struggle over whether Greece should be allowed to fail or, by keeping it afloat, potentially take down the entire EU and maybe the rest of the global economy with it. The central banking powers and politicians around the globe are about at wit's end over the crisis in Europe, and are seemingly capable of saying or doing just about anything to stave off the eventual collapse of the Euro as a viable currency.

Sadly, for them and for the rest of us, eventualities do occur despite the best efforts of bright people to change the course of reality. It's so obvious to everyone now that Greece has to go, and soon, and they will take down untold numbers of European-based banks and spread the default contagion far and wide. Welcome to the 2008 redux.

For those who make a living trading, this environment is conducive to massive profits if one is nimble, smart and engaged, though at the end of the day all the swaps, hedges and protection aren't going to matter one whit when the financial tsunami crests upon first Greece's pristine shores and continues along the Mediterranean to Italy, Spain and Portugal. Once it races through the Straits of Gibraltar, all nations will be at risk, though the most isolated may be the best-insured. Countries out of the way, like Russia, India, Indonesia and Canada, may be spared the brunt of the blows, though general commerce will be affected globally.

It's coming. Everybody knows it. Most are in denial. That's how we get miracle rallies out of the blue and smashing declines on real news.

What to watch for are waves of large bankruptcies, like that of Saab, recently, sure to be followed by smaller suppliers and next by maybe a Chrysler or General Motors, which has traded below its IPO price for a solid six months after being bailout out by the US taxpayer. Nobody is buying new cars, and they're especially steering clear of GM (aka Government Motors) models. We are in the final stages of financial collapse, the first wave coming in 2008 and truncated by massive capital injections by the Federal Reserve, other central banks and governments from Paris to Beijing.

The financial paradigm of debt-issued money being created out of thin air, fractional reserve banking and crony capitalism has been broken and will soon find itself in complete and utter chaos. Events such as today's turnaround on Wall Street serve as apt reminders that the system is broken beyond human repair. It will take an act of God or an invasion from outer space to fix the mess and neither of those potentialities are on the horizon.

Adding insult to injury, analyst Meredith Whitney cut her third quarter earnings estimates on Goldman Sachs and Morgan Stanley late in the day. Whitney, a highly-respected banking analyst, cut Goldman Sachs (GS) from 3.39 per share to a mere 31 cents, a 90% haircut. Morgan Stanley (MS) was cut from 53 cents to 28, so it would be best to be prepared for a third quarter earnings bloodbath, not only for banking stocks, but for a host of other well-known names. Results from the previous quarter and year-ago will be hard to match for many firms, with the 4th quarter looking even more devilish.

Dow 11,190.69, +146.83 (1.33%)
NASDAQ 2,546.83, +30.14 (1.20%)
S&P 500 1,175.38, +12.43 (1.07%)
NYSE Composite 7,043.12, +102.31 (1.47%)
NASDAQ Volume 2,109,385,500
NYSE Volume 5,515,045,000
Combined NYSE & NASDAQ Advance - Decline: 5195-1451
Combined NYSE & NASDAQ New highs - New lows: 37-102
WTI crude oil: 84.45, +4.21
Gold: 1,652.50, +57.70
Silver: 31.54, +1.56

Wednesday, May 18, 2011

Making Money at the Margins and Why the Rigged Game Doesn't Matter

OK, all you wise guys who think they know how the markets work and how to make money in them. If you've been paying attention the past few weeks and months, you may have noticed some kinds of patterns that have developed, both in individual stocks and in the general indices.

One such pattern is playing out right now, and, of course, as all things on Wall Street are now played out in factors of milliseconds, this one and its tangential cousin, is pretty obvious.

First, let's look at the overall picture and then we'll jump into the tangent by-product of what is essentially a swing trade that takes place over the span of a few weeks, but can be played by the day, hour, or, if you have ultra-fast connections, the millisecond.

It's all about movement and that herky-jerky, up-down action that's become so common over the past ten years or so. Taking a look at the movement of the Dow Jones Industrials over the past two weeks (actually, 13 trading sessions, or the month of May, to date), we find the following:


So, we see stocks go up, stocks go down, but, by the end of the day, the RANGE, from the highs to the lows, are amplified double, triple or many more times the amount of gain.

Why is this significant? Because, if you know which way the market is going, minute-to-minute, day-to-day, obviously, you can make a fortune. And you know those sharpies at Goldman Sachs, Merrill Lynch (owned by Bank of America), Morgan Stanley and JP Morgan have all been boasting some awesome profits on their trades. Most of them will go entire quarters without having more than one or two losing days.

How do they do it, and why can't you and I? Because, they pretty much are the market. Their volume of trades is probably 75% or more of the total volume trading. They can move individual stocks any way they like, whole indices if they work in collusion. Funny word, that collusion. In its barest form, it is defined as: Secret or illegal cooperation or conspiracy, esp. in order to cheat or deceive others. Oh, yeah, and it's very, very illegal.

Now, I'm not saying that these big Wall Street firms are engaging in anything illegal. After all, the government just bailed them out with billions of dollars of taxpayer dollars a few years ago and the Fed keeps shuffling them money nearly every day via their POMOs. So, why would they need to cheat?

Well, nobody has to cheat, but it sure makes the game a heck of a lot easier if you do. And, judging by what these very same firms did when they were hurling mortgage-backed securities and credit default swaps around, they've shown a propensity for, uh, cutting corners and shading the truth, all to their advantage.

By determining the direction of the market due to the size of their cumulative trades, they almost have to make money every day, every minute, every, yes, millisecond. They are the best at their craft, no doubt about that, and they can shave every last dollar off an individual investor's hide. No doubt, they are not very concerned with the success or failure of anybody but themselves and their largest clients, who are likely clued into the game and whose money they use to goose or deflate stocks and whole markets.

Face it, with four or five big firms handling most of the daily volume, does anybody else really stand a chance? And just how reliable are these stocks which are jumping around in inconceivable patterns on a fundamental basis?

It makes one question the validity and freedom of our markets, something which I've called into question many times here. To be perfectly honest, I've often considered giving up this daily blog, because, when one gets right down to the nitty-gritty details, there's no technical analysis needed, no market savvy needed. All one really has to do is go with the flow, day-by-day, every day, to make money, but that assumes you know which way the flow is going. It would be a full time job, though there's no guarantee that even the smartest, most skilled day-traders, armed with the best data and fastest computers, would come out ahead, only because the big boys on the inside would be skimming at the margins all along.

There's little doubt that the traders on the street, employed by the major firms, have a massive advantage, and it's probably much the same way in commodity markets, forex markets and any other market in which they have established a presence. While the markets may be kind to those at the top, the risk level is quite high for everyone else, and that's why I just write about it. I haven't made a single trade in almost two years, and even then I was playing very lightly.

So, what to do?

Honestly, I don't know. I've advocated silver and gold for the past few years, but we've seen recently what can happen there, especially in the case of silver, which took a 30% haircut in just about two weeks time, proving no market is safe from the ravages of the Wall Street gang.

That covers the general trend here. No about that tangential trade. Referring to the chart above again, notice today's action: an 80 point gain and a mere 128 point range. Today's trading was almost all one-way, and I'll wager that tomorrow will be more of the same, and maybe even Friday, too. Why? Take a look at the calendar. Options expiration is Friday and there's plenty of money out there looking to cash in on the upside.

For all the ups and downs over the past 13 sessions, the Dow is only down 250 points, about 2%. By Friday, there's a very good chance it will be less than that, and a whole bunch of traders will be high-fiving each other over their exploits in the options markets.

Hey, it's a lifestyle.

Dow 12,560.18, +80.60 (0.65%)
NASDAQ 2,815.00, +31.79 (1.14%)
S&P 500 1,340.68, +11.70 (0.88%)
NYSE Composite 8,407.48, +74.41 (0.89%)

Things turned dramatically today for now apparent reason. Advancers trounced decliners, 4999-1573. On the NASDAQ, a dead heat. There were an equal number of stocks making new highs and new lows, 52 of each. Over on the NYSE, new highs led new lows, 121-22. Volume was right back in the old toilet, simply because, as stated above, there aren't that many players.

NASDAQ Volume 1,893,562,500
NYSE Volume 3,871,767,500

Crude oil was up sharply, gaining $3.19, to $100.10 on reports of a drawdown in supply and raging fires in Alberta, Canada, home to major oil operations. While Canada is our largest supplier of oil (no, honey, not those nasty A-Rabs), the amount of crude affected is a small fraction of the daily import total, but that doesn't matter to the market manipulators, apparently. Anything to goose the price at the pump a little higher, they'll use it, whether it makes sense or not.

Gold managed a gain of $9.90, hitting the $1496.90 mark, while silver rocketed higher by $1.11, to $35.02. Word has been circulating that the major shorters of silver have cut back their activity to a level not seen since last fall. That should be a signal to most silver players that it's safe to wade back into the market, as the price manipulators have covered their out-of-line bets and gone to play elsewhere.

What else can one conclude from the wild swings and unusual weather but that ours is a very strange and still quite untamed world.

Friday, April 23, 2010

No Doubt About It: The Banks Stole Your Money

So much for my triple-top theory.

With the Dow putting on gains to close out the week - finishing at new highs for the 8th consecutive week - the world's most watched index is now at 18-month highs, leaving the memories of Lehman Bros., TARP and the painful housing crisis far behind in the memory hole.

But while stocks and traders are rejoicing over their riches, they fail to see, or even understand, the devastation caused by kicking 2 million families out of their homes or 8 million (probably more) out of jobs. Wall Street pros have stars on their foreheads and in their eyes. They obviously do not share the same values as most middle-class Americans.

The rally which began on March 10, 2009 has now reached extraordinary status. It is a full 12 1/2 months old, and the percentage gains off the bottom are simply spectacular.

Let's Recap:

The following are the March 9, 2009 lows, then today's closing prices, followed by the percentage gains.

Dow... 6,547.05 ... 11,204.28 ... +71,13%
S&P 500... 676.53 ... 1,217.28 ... +79.93
NASDAQ... 1,268.64 ... 2,530.15 ... +99.44
NYSE Comp. ... 4,226.31 ... 7,701.61 ... +82.23

There you have it. All anyone had to really do to turn $10,000 into roughly $18,000 over the course of the past 13 months was to buy all the stocks in any index and let it ride. For the rich and powerful, such as the lead traders at Goldman Sachs, the trick was to turn $1 billion or $10 billion into $1.8 billion or $18 billion. Being even more sophisticated, they probably had returns which far outstripped those of the entire indices.

Is there any wonder how the biggest frauds and thieves eve to walk the face of the earth (the leaders of Citigroup, Bank of America, Goldman Sachs, et. al.) were all able to pay back the government's (read: taxpayers) TARP money within a year's time?

Not only did the financial calamity which took the stock market down in the Fall of 2008 through the Winter of 2009 appear to be contrived and driven by the same people who created it, so too the "miraculous" recovery of stocks overall, and their very own firms, to boot.

On March 9, 2009, Bank of America (BAC) closed at 3.74. Citigroup (C) finished the session at 1.05; Goldman Sachs (GS), 73.28; Morgan Stanley (MS), 16.34; JP Morgan Chase (JPM), 15.79; Wells Fargo (WFC), 9.89 (actually closed at 8.06 on March 5).

Today, Bank of America finished the session at 18.43; Citigroup, 4.86; Goldman Sachs, 157.40; Morgan Stanley, 31.94; JP Morgan Chase, 44.94; and Wells Fargo, 33.48.

These are the five largest private sector financial institutions in the country. They've all done exceedingly well over the past 13 months, mostly at the expense of foreclosed-upon homeowners, people strung out on credit cards carrying rates that used to be called usury and millions of unemployed workers who lost their jobs because these bankers and traders convinced most of corporate America that the sky was falling. That the crisis occurred at the very end of the Bush administration's reign of terror was no coincidence. It was easily the greatest crime of all time.

All of these firms ruthlessly cut their dividend payouts to shreds at the height of the crisis and are still paying out less than 1% each. Citigroup pays no dividend. Goldman Sachs is the most generous, at 0.90%, at a time in which they paid their employees 43% of profits. These guys never learned to share.

Wall Street has changed dramatically from the days in which prices were quoted in eighths and sixteenths. Today's "titans" need billions of dollars to fill up their coffers in the highly rigged game of liar's poker. As a market observer - and sometimes participant - of over 35 years, I can safely say I have never seen a crash nor a rally quite as spectacular as the ones witnessed over the past 19 months. And, as the saying goes, "if it looks to good to be true, it probably isn't."

I don't know where this rally will end, or how, but it will, I imagine. Maybe it won't. Maybe the "masters of the universe" will keep stocks on a permanent upward slope in order to capture even more of the world's money supply. After all, government's just keep printing the stuff, so the bankers and frauds have to use up more of it, don't they?

I've been out of this market since December of 2009 and won't venture back in until I see some of these companies' CEOs in leg irons, which means I've probably already made my last investment in equities. I consider the current regime of manipulators and skimmers to be nothing better than common crooks. Having already stolen much of America's private wealth, they're no doubt scheming to steal the rest. At the risk of sounding like a curmudgeon, I'll keep the reporting in this same vein.

Wall Street is the biggest fraud most of us will ever see. enjoy it while it lasts.

Dow 11,204.28 69.99 (0.63%)
NASDAQ 2,530.15 11.08 (0.44%)
S&P 500 1,217.28 8.61 (0.71%)
NYSE Compos 7,701.61 58.78 (0.77%)

Advancers led decliners by a wide margin, 4406-2097. So too, new highs, all 1130 of them, crushed the 68 new lows. Volume was slimmed down from the levels earlier in the week.

NYSE Volume 5,888,237,000.00
NASDAQ Volume 2,434,851,250.00

Oil gained $1.42, to $85.12. Gold gained $10.80, to $1,153.10. Silver was higher by 18 cents, finishing at $18.19.

Everything went up today except your paycheck. Seriously, working has become the toil of suckers. If the "retirement investments" aren't wiped out by the frauds of finance, the taxman will take whatever else there is.

Good grief. Good luck.

Wednesday, April 22, 2009

Economic Realities Ignored by Propagandist Media

The media is doing a very nice job of covering up the real issues involving the US economy, the banks, TARP and Treasury's role in the massive fraud being foisted on the nation's public.

Yesterday, Tim Geithner's comments that the "vast majority" of US banks had sufficient capital were largely credited for pumping an afternoon market rally led by the financial sector. That tidbit was so widely reported that it brought back memories of Republican "talking points" to media outlets, all of which parroted the party line during the Bush years.

It now seems apparent that the press corps is still being led by nose rings pulled by the PR machine of the federal government. Much of the news that the government doesn't want the public to know about is widely dispensed by newspapers - which nobody reads anymore - and online, increasingly becoming the true fourth estate. Case in point is that at the very same time Treasury Secretary Tim Geithner was testifying that government programs were working, TARP Inspector General Neil Barofsky issued a scorching 250-page report detailing "staggering" fraud and waste inherent in the program, citing the more than 20 separate criminal investigations involving TARP, while criticizing the program's size as unwieldy and prone to abuse.

The controlled propaganda from D.C., the major TV networks and cable outlets is probably not going to be able to stem the tide of negatives which eventually will flood the secondary news media, on the internet, radio, financial newsletters and magazines. There is simply too much bad news for the mainstream media to blunt all of it. Just this morning, prior to the markets' opening, more bad news from the banking complex overwhelmed the investing community as Morgan Stanley (MS) reported a 1st quarter loss far in excess of analyst expectations. The company posted a loss of 57 cents a share ($177 million), swinging completely around from the profit of $1.41 billion, or $1.26 a share, generated in the first three months of 2008.

Analysts were looking for a loss of 8 cents a share in the quarter. This was a massive miss that everyone should notice, not just the investment community.

As it was, the Dow opened with a loss of just 75 points, with other indices responding in similar ho-hum fashion, no doubt due to excess upside pressure being exerted by the brokerages which control most of the trading. By 10:00 am, the Dow, S&P and NASDAQ had already turned positive and headed higher, begging the question of just how much bad news will it take to make the markets respond in anything close to realism?

While control issues of the media and the markets become more apparent, maybe the Machiavellian nature of this episode in American history will become more apparent with today's apparent suicide of acting chief financial officer of troubled mortgage giant Freddie Mac.

According to reports, 41-year-old David Kellerman was a lifer at Freddie, having worked his way up from his analyst position in 1992 all the way to the executive suite. His death brings into play many questions, because he - of all people - was a man who may have known too much. Did Kellerman kill himself because he was being set up for a fall, or was the suicide another "black op" designed to silence him from going public on matters that might expose key politicians or people on their staffs?

Either case is damning to the government, as they attempt to plug every leak in their quickly-sinking ship of state. Fannie Mae and Freddie Mac are linchpins in the entire financial meltdown that have yet to be adequately exposed. They are both severely undercapitalized and without enormous injections of government money, would be insolvent. Even with the massive funding from the government, they are already deeply underwater.

Also being represented on the national airwaves, Chrysler and GM's dire straits. Both companies continue to inch closer to bankruptcy. In Chrysler's case, such a scenario would mean liquidation. GM might be able to restructure in an orderly proceeding, though tens of thousands of jobs would be lost. Chrysler faces a May 1 deadline to reach a merger agreement with Italian automaker Fiat, itself under severe strain from declining auto sales.

Separately, General Motors announced late Wednesday that they may close some plants for up to 9 weeks this summer to save money. The automaker, once the pride of US industrial might, faces a government-imposed June 1 deadline to craft a workable plan to receive more federal aid. The alternative is bankruptcy, though even those closest to negotiations are unclear as to how such a plan would be structured.

Meanwhile, on Wall Street Wednesday, stocks were up early and down late, as the drumbeat of bad economic news is offset by a smattering of reasonable earnings reports from major firms.

Dow 7,886.57, -82.99 (1.04%)
NASDAQ 1,646.12, +2.27 (0.14%)
S&P 500 843.55, -6.53 (0.77%)
NYSE Composite 5,290.61, -48.98 (0.92%)

Despite the negative slant to the markets on the day, advancers actually outperformed declining issues, 3440-3006. There were 83 reported new lows to 34 new highs. Volume was again on the high side.

NYSE Volume 1,770,590,000
NASDAQ Volume 2,662,538,000

Commodities continued to limp along, dealing with slack demand in many industries. Crude oil for June delivery (new contract) gained just 30 cents, closing at $48.85. Foodstuffs were marginally lower. Precious metals continued to show some strength, with gold higher by $9.80, to $892.50. Silver finished the day in New York up 25 cents, at $12.31.

First time unemployment claims will greet market players on Thursday morning before the open. Experts are hoping for a continuation of last week's slight surprise of lower claims, though overall, unemployment remains abnormally high an a chief concern for millions of Americans and their families. More corporate reports will flow to market, though expectations are now so low that a good number may beat the Street but still be seen as vulnerable investments.

Sooner or later, the bad news catches up to everyone. While the government and media outlets try to paint a brighter picture than that which exists, issues such as trust and confidence are being severely tested.