With interest rates at historic lows, individuals and funds which are primarily risk-averse or on fixed incomes need to carefully choose their preferred investment vehicles, because inflation is going to eat into most of what's earned in either dividend-producing or fixed-rate investments.
Nonetheless, there are options which can be investigated in search of the best interest rates on money market accounts, where the goal is not growth nor income, but, rather, preservation of capital against the ravages of inflation, which is running at an annual rate of three to six percent, depending upon the source and one's own individual lifestyle choices.
Among the more flexible choices for investors these days are money market accounts, which, unlike certificates of deposit or US Treasury bonds, doesn't tie up an investor's capital for months or years at a time. Modern money market accounts can be found within offerings from brokerage accounts, through banks, credit unions or other lending or financial institutions, and the benefits of holding one's money in one are myriad, from limited tax liability to some which offer checking accounts upon which one can draw out funds or even debit cards tied to the account, which makes certain money market accounts not only wise investments, but useful choices in today's fast-paced environment.
Due to regulations and requirements under Regulation Q, which defines and governs money market accounts, most institutions limit the amount of money one can withdraw in a given time frame (usually monthly) or the number of transactions one can make within a money market account without incurring fees or penalties. Thus it makes good sense to investigate some of the literally thousands of web sites which offer comparisons or informational links concerning personal investing in money market accounts. Since money market accounts are regulated under the auspices of the US Treasury, understanding the rules and tax implications is a good first step to learning which funds or accounts fit best with your individual situation.
Once a decision is made to open such an account, a search for the best interest rates on money market accounts should be the next undertaking, though it pays to read the fine print, because, like all investment or financial accounts, there are multiple choices that may or may not be beneficial to your particular goals.
At worst, money market accounts are useful tools for keeping the money you do have, especially if you're concerned about volatility or risk in other markets, such as stocks, bonds, or derivatives, the most risky of all investments. Most money markets are government guaranteed against default, so any funds committed to them are as safe, if not safer, than money in a bank.
Flexibility is key, so choose a money market account that meets your established needs, offers a fair interest rate without onerous restrictions, and you'll sleep well at night, knowing your money is in a sound and secure environment.
Showing posts with label banks. Show all posts
Showing posts with label banks. Show all posts
Friday, October 28, 2011
Wednesday, October 12, 2011
Market Melt-up Continues for US Stocks
News from Europe that the Slovakian government would re-vote on extending additional bailout funds to banks via the ESFS was like a sugar-coated treat to the childish cretins of the Wall Street investment community.
Shortly after the close of markets in the US yesterday, the Slovakian parliament became the only one of 17 countries to turn down the additional relief package proposal, sending shock waves throughout the EU and the rest of the financial universe. The package needed the approval of all members. Within minutes, however, there was talk of a deal on a re-vote, paving the way for a steady flow of funds to repair badly-damaged and close to insolvent European banks which have bourn the brunt of rolling bailouts to Greece, Ireland, Portugal and soon, Spain and Italy.
There was widespread optimism that the Slovak parliament would rework the proposal to fit their agenda and save Europe from imminent collapse. As has been the case for so long with all things Euro-related, the overseeing body of the European Union (EU) and the European Central Bank (ECB), a slight shift or change in the rules always seems to be the tonic whereby the Euro remains a "viable" currency and staves off the collapse, first, of Greece, and eventually the entire structure upon which the Euro currency is based.
With such confidence that European leaders would tread along the same path upon which the US staved off financial armageddon in 2008 after the Lehman Bros. bankruptcy, stocks were sent higher throughout the session, assured that the classic Ponzi scheme of international finance has finally gone global.
Along that line of thinking, John Embry, Chief Investment Strategist of Sprott Asset Management, said, in an interview with King World News, that stocks could decline by 40% if the European crisis turns into a repeat of 2008, and added, "I think investors have to be aware of the degree of manipulation in all of the markets here and not make the mistake of being momentum players. They shouldn’t just try to go with what is working and jump on board because a lot of this is manufactured for the sake of appearances."
Exactly. Global leaders don't want to see another major disruption like that of 2008, because their main concern is holding onto the reins of power they have secured, even if it means lying about where money is coming from, going to, bank balance sheets, stress tests and just about everything else if it means they get to keep their high posts.
While banks and the people who run them are most responsible for economic calamities over the past few years, politicians share much of the blame, enabling the ill-conceived schemes of the financial class with endless bailouts, ruses and guarantees while much of the global economy is reduced to a pile of worthless, paper rubble.
There was some late-day selling - a chink in the globalist armor and yet another indication of manipulated markets as there was no move to quiet the rally - and stocks finished with only about half of the gains racked up over the session. For instance, the Dow Jones Industrials were up by 209 points at about 2:30 pm, but closed with a gain of just 102. It pays to be a tape watcher these days, as waves of both buying and selling can occur at any time on any given day, no matter the news.
Only on major company reported earnings after Alcoa kicked off 3Q earnings season with a substantial miss on income Tuesday. PepsiCo (PEP) reported before the open that it had earned 1.31 per share after some one-time items, beating the Street estimates by a penny. The gains were largely attributed to Pepsi's aggressive pricing policy in which the company boosted prices around the world on its popular soft drink and snack brands.
Therein lies the conceit and thinly-veiled deceit of Wall Street. PepsiCo saw margin compression in the quarter, as operating margin narrowed to 16.5 percent from 18 percent a year earlier. Earnings for the giant company - with revenue approaching $18 billion in the quarter - have been mostly flat for the past year. Price increases, workforce reductions, cost-cutting and balance sheet shenanigans are what drives this company these days. Growth is largely the result of internal manipulations, not market share increases. Over the past five years, growth has slowed to a mediocre 5.87% per year, though making even that low level over the past few years has been difficult.
Dow 11,518.85, +102.55 (0.90%)
NASDAQ 2,604.73, +21.70 (0.84%)
S&P 500 1,207.25, +11.71 (0.98%)
NYSE Composite 7,263.69, +102.43 (1.43%)
NASDAQ Volume 1,998,280,250
NYSE Volume 5,355,361,000
Combined NYSE & NASDAQ Advance - Decline: 5250-1511
Combined NYSE & NASDAQ New highs - New lows: 41-35 (a reversal, which should not last)
WTI crude oil: 85.57, -0.24
Gold: 1,682.60, +21.60
Silver: 32.79, +0.79
Shortly after the close of markets in the US yesterday, the Slovakian parliament became the only one of 17 countries to turn down the additional relief package proposal, sending shock waves throughout the EU and the rest of the financial universe. The package needed the approval of all members. Within minutes, however, there was talk of a deal on a re-vote, paving the way for a steady flow of funds to repair badly-damaged and close to insolvent European banks which have bourn the brunt of rolling bailouts to Greece, Ireland, Portugal and soon, Spain and Italy.
There was widespread optimism that the Slovak parliament would rework the proposal to fit their agenda and save Europe from imminent collapse. As has been the case for so long with all things Euro-related, the overseeing body of the European Union (EU) and the European Central Bank (ECB), a slight shift or change in the rules always seems to be the tonic whereby the Euro remains a "viable" currency and staves off the collapse, first, of Greece, and eventually the entire structure upon which the Euro currency is based.
With such confidence that European leaders would tread along the same path upon which the US staved off financial armageddon in 2008 after the Lehman Bros. bankruptcy, stocks were sent higher throughout the session, assured that the classic Ponzi scheme of international finance has finally gone global.
Along that line of thinking, John Embry, Chief Investment Strategist of Sprott Asset Management, said, in an interview with King World News, that stocks could decline by 40% if the European crisis turns into a repeat of 2008, and added, "I think investors have to be aware of the degree of manipulation in all of the markets here and not make the mistake of being momentum players. They shouldn’t just try to go with what is working and jump on board because a lot of this is manufactured for the sake of appearances."
Exactly. Global leaders don't want to see another major disruption like that of 2008, because their main concern is holding onto the reins of power they have secured, even if it means lying about where money is coming from, going to, bank balance sheets, stress tests and just about everything else if it means they get to keep their high posts.
While banks and the people who run them are most responsible for economic calamities over the past few years, politicians share much of the blame, enabling the ill-conceived schemes of the financial class with endless bailouts, ruses and guarantees while much of the global economy is reduced to a pile of worthless, paper rubble.
There was some late-day selling - a chink in the globalist armor and yet another indication of manipulated markets as there was no move to quiet the rally - and stocks finished with only about half of the gains racked up over the session. For instance, the Dow Jones Industrials were up by 209 points at about 2:30 pm, but closed with a gain of just 102. It pays to be a tape watcher these days, as waves of both buying and selling can occur at any time on any given day, no matter the news.
Only on major company reported earnings after Alcoa kicked off 3Q earnings season with a substantial miss on income Tuesday. PepsiCo (PEP) reported before the open that it had earned 1.31 per share after some one-time items, beating the Street estimates by a penny. The gains were largely attributed to Pepsi's aggressive pricing policy in which the company boosted prices around the world on its popular soft drink and snack brands.
Therein lies the conceit and thinly-veiled deceit of Wall Street. PepsiCo saw margin compression in the quarter, as operating margin narrowed to 16.5 percent from 18 percent a year earlier. Earnings for the giant company - with revenue approaching $18 billion in the quarter - have been mostly flat for the past year. Price increases, workforce reductions, cost-cutting and balance sheet shenanigans are what drives this company these days. Growth is largely the result of internal manipulations, not market share increases. Over the past five years, growth has slowed to a mediocre 5.87% per year, though making even that low level over the past few years has been difficult.
Dow 11,518.85, +102.55 (0.90%)
NASDAQ 2,604.73, +21.70 (0.84%)
S&P 500 1,207.25, +11.71 (0.98%)
NYSE Composite 7,263.69, +102.43 (1.43%)
NASDAQ Volume 1,998,280,250
NYSE Volume 5,355,361,000
Combined NYSE & NASDAQ Advance - Decline: 5250-1511
Combined NYSE & NASDAQ New highs - New lows: 41-35 (a reversal, which should not last)
WTI crude oil: 85.57, -0.24
Gold: 1,682.60, +21.60
Silver: 32.79, +0.79
Monday, September 19, 2011
Stocks Down on Greece, Bank Issues
The Markets
There were just two simple reasons for stocks to start out the week as miserably as they did: banks and Greece.
Naturally, there's more to it than just that, though those two catalysts have been driving the markets - in one direction or the other - for about the past year-and-a-half. There was also the concept, disclosed here on Friday, that last week's five-day rally was based upon pure nothingness, much like our fiat American currency. Coming at the end of options expiration, the market action for the week was completely suspect, and today market participants were treated to the big winners squaring their books.
But fears of a Greek default (it will happen. It must, because Greece is broke.) and its effects on the banking community worldwide clearly pushed Eurpean stocks lower and so too with US indices. The Dow dove more than 250 points in the early going, taking the rest of the market down with it. Of course, there was the obligatory, short-covering, melt-up rally at 3:00 pm, which cut the day's losses roughly in half, but today will look like a picnic compared to what's on the event horizon in the not-so-distant future.
That's really it. There was no real substantive news of any kind, outside of President Obama droning on about taxing the rich in a morning speech. The markets continue to experience great stress, but if the banks in this country are feeling the pain, all one can say is that it couldn't happen to a more-deserving group.
In news you won't see covered in any depth by the mainstream media, Ron Paul took the California Republican Party straw poll by a landslide, winning 44.9% of the vote, and seven are arrested during third day of Wall Street protests.
The latter story was reported by Bloomberg, and, as much as we like the company founded by the current New York mayor, they're still a bit outside the establishment mainstream of the large TV network apparatus.
Dow 11,401.01, -108.08 (0.94%)
NASDAQ 2,612.83, -9.48 (0.36%)
S&P 500 1,204.09, -11.92 (0.98%)
NYSE Composite 7,234.63, -113.55 (1.55%)
NASDAQ Volume 1,900,534,375
NYSE Volume 4,224,766,500
Combined NYSE & NASDAQ Advance - Decline: 1497-5053
Combined NYSE & NASDAQ New highs - New lows: 47-185
WTI crude oil: 85.70, -2.26
Gold: 1778.50, -34.00
Silver: 39.65, -1.01
There were just two simple reasons for stocks to start out the week as miserably as they did: banks and Greece.
Naturally, there's more to it than just that, though those two catalysts have been driving the markets - in one direction or the other - for about the past year-and-a-half. There was also the concept, disclosed here on Friday, that last week's five-day rally was based upon pure nothingness, much like our fiat American currency. Coming at the end of options expiration, the market action for the week was completely suspect, and today market participants were treated to the big winners squaring their books.
But fears of a Greek default (it will happen. It must, because Greece is broke.) and its effects on the banking community worldwide clearly pushed Eurpean stocks lower and so too with US indices. The Dow dove more than 250 points in the early going, taking the rest of the market down with it. Of course, there was the obligatory, short-covering, melt-up rally at 3:00 pm, which cut the day's losses roughly in half, but today will look like a picnic compared to what's on the event horizon in the not-so-distant future.
That's really it. There was no real substantive news of any kind, outside of President Obama droning on about taxing the rich in a morning speech. The markets continue to experience great stress, but if the banks in this country are feeling the pain, all one can say is that it couldn't happen to a more-deserving group.
In news you won't see covered in any depth by the mainstream media, Ron Paul took the California Republican Party straw poll by a landslide, winning 44.9% of the vote, and seven are arrested during third day of Wall Street protests.
The latter story was reported by Bloomberg, and, as much as we like the company founded by the current New York mayor, they're still a bit outside the establishment mainstream of the large TV network apparatus.
Dow 11,401.01, -108.08 (0.94%)
NASDAQ 2,612.83, -9.48 (0.36%)
S&P 500 1,204.09, -11.92 (0.98%)
NYSE Composite 7,234.63, -113.55 (1.55%)
NASDAQ Volume 1,900,534,375
NYSE Volume 4,224,766,500
Combined NYSE & NASDAQ Advance - Decline: 1497-5053
Combined NYSE & NASDAQ New highs - New lows: 47-185
WTI crude oil: 85.70, -2.26
Gold: 1778.50, -34.00
Silver: 39.65, -1.01
Friday, September 16, 2011
A Most Unimpressive Five-Day Rally Built on Sand
Even the excitement of options expiration on Friday - which explains just about everything about the week-long rally - could not keep stocks from registering a fairly unimpressive Friday showing.
Normally, on options expiration days, like today, volume spikes and the market generally takes off or sells off. Today's trade could best be characterized as choppy and sloppy, with all the major indices finishing close to their highs of the day thanks only to a spirited short-covering-into-the-weekend sprint in the final fifteen minutes of trading. The Wall Street criminal syndicate must have had their computers whirring at warp 10 at the end of the day.
The main reason the week-long rally was so unimpressive was threefold: first, the starting point came off a three-week low, the averages are stuck in a fairly enduring trading range, and the fact that options expired at the end of the week gives the impression that smallish short-term gains were all the focus. Nothing about the "sharp" rally was particularly exciting or indicative of any longer term trend.
The following recap shows, with links to charts, that trading stocks has been even less than a zero-sum game for the better part of the past two months.
First, the Dow, which closed today less than 25 points from its daily high, started off the week from a low point of 10,992, gaining what looks, at first glance, to be an impressive 517 points for the week, though considering it is still hovering below its falling 50-day moving average, which itself is blow the 200-day MA, shows that it's just another cyclical bear market, momentum move. Actually the recent rally from August 22 to 31 - 8 trading days - was broader and larger. Look what happened to that. It fell apart.
Besides that, the Dow remains well below the mid-July high of 12724 and even further down from the April 29 high 2011 high.
The NASDAQ was a bit more robust, the best-performing index of the bunch, today finally getting past its 50-day MA, though it remains below the flat-lined 200-day MA. It kicked up 154 points for the week, but, like the Dow, is still far short of the 2858 close on July 22 and down further from the April 29 high.
As for the most widely-watched S&P 500 index, it too came off a three-week low at the end of last week, picked up 62 points and is touching its 50-day MA. Like the other major indices, the 50-day has crossed under the 200-day MA. The S&P is 140 points below its early July high and that's a long way to go.
Obviously, the factors influencing the market movements this week were largely concerning Europe, which is still a basket case on the verge of total calamity, despite the best efforts of central bankers to paint a rosier picture than the stark reality of a Lehman-like debt implosion. The other factor, which should not be discounted in the least, was the quadruple-witching options expiration on Friday. With risk still quite high in the current environment, many a hedge fund and major trading firm is heavily invested in the options market and pushed their positions to winning spots all during the week. To see a continuation of this rally on Monday would be quite remarkable, considering that it is wholly fabricated by the few remaining players with the ability to move more than just individual stocks, but entire indices whichever way they please.
Since the correction which began in early July, stocks have gone sideways for the past six weeks, and, despite this marvelous, low-volume pump job, show no real signs of breaking out, over and beyond the 200-day moving averages and above the recent highs. Traders made money here, but investors are just as nervous as they were at the end of last week. Considering the dour economic data and the continuing credit, sovereign and currency crunch on the European banking establishment, any elongated upside should be considered a long shot.
Dow 11,509.09, +75.91 (0.66%)
NASDAQ 2,622.31, +15.24 (0.58%)
S&P 500 1,216.01, +6.90 (0.57%)
NYSE Composite 7,348.18, +19.08 (0.26%)
NASDAQ Volume 2,662,978,250
NYSE Volume 5,098,945,000
Combined NYSE & NASDAQ Advance - Decline: 3404-3109 (no breadth)
Combined NYSE & NASDAQ New highs - New lows: 69-69 (seriously!)
WTI crude oil futures: 87.96, -1.44 (hurrah!)
Gold: 1810.10, +20.30
Silver: 40.65, +0.74
Normally, on options expiration days, like today, volume spikes and the market generally takes off or sells off. Today's trade could best be characterized as choppy and sloppy, with all the major indices finishing close to their highs of the day thanks only to a spirited short-covering-into-the-weekend sprint in the final fifteen minutes of trading. The Wall Street criminal syndicate must have had their computers whirring at warp 10 at the end of the day.
The main reason the week-long rally was so unimpressive was threefold: first, the starting point came off a three-week low, the averages are stuck in a fairly enduring trading range, and the fact that options expired at the end of the week gives the impression that smallish short-term gains were all the focus. Nothing about the "sharp" rally was particularly exciting or indicative of any longer term trend.
The following recap shows, with links to charts, that trading stocks has been even less than a zero-sum game for the better part of the past two months.
First, the Dow, which closed today less than 25 points from its daily high, started off the week from a low point of 10,992, gaining what looks, at first glance, to be an impressive 517 points for the week, though considering it is still hovering below its falling 50-day moving average, which itself is blow the 200-day MA, shows that it's just another cyclical bear market, momentum move. Actually the recent rally from August 22 to 31 - 8 trading days - was broader and larger. Look what happened to that. It fell apart.
Besides that, the Dow remains well below the mid-July high of 12724 and even further down from the April 29 high 2011 high.
The NASDAQ was a bit more robust, the best-performing index of the bunch, today finally getting past its 50-day MA, though it remains below the flat-lined 200-day MA. It kicked up 154 points for the week, but, like the Dow, is still far short of the 2858 close on July 22 and down further from the April 29 high.
As for the most widely-watched S&P 500 index, it too came off a three-week low at the end of last week, picked up 62 points and is touching its 50-day MA. Like the other major indices, the 50-day has crossed under the 200-day MA. The S&P is 140 points below its early July high and that's a long way to go.
Obviously, the factors influencing the market movements this week were largely concerning Europe, which is still a basket case on the verge of total calamity, despite the best efforts of central bankers to paint a rosier picture than the stark reality of a Lehman-like debt implosion. The other factor, which should not be discounted in the least, was the quadruple-witching options expiration on Friday. With risk still quite high in the current environment, many a hedge fund and major trading firm is heavily invested in the options market and pushed their positions to winning spots all during the week. To see a continuation of this rally on Monday would be quite remarkable, considering that it is wholly fabricated by the few remaining players with the ability to move more than just individual stocks, but entire indices whichever way they please.
Since the correction which began in early July, stocks have gone sideways for the past six weeks, and, despite this marvelous, low-volume pump job, show no real signs of breaking out, over and beyond the 200-day moving averages and above the recent highs. Traders made money here, but investors are just as nervous as they were at the end of last week. Considering the dour economic data and the continuing credit, sovereign and currency crunch on the European banking establishment, any elongated upside should be considered a long shot.
Dow 11,509.09, +75.91 (0.66%)
NASDAQ 2,622.31, +15.24 (0.58%)
S&P 500 1,216.01, +6.90 (0.57%)
NYSE Composite 7,348.18, +19.08 (0.26%)
NASDAQ Volume 2,662,978,250
NYSE Volume 5,098,945,000
Combined NYSE & NASDAQ Advance - Decline: 3404-3109 (no breadth)
Combined NYSE & NASDAQ New highs - New lows: 69-69 (seriously!)
WTI crude oil futures: 87.96, -1.44 (hurrah!)
Gold: 1810.10, +20.30
Silver: 40.65, +0.74
Thursday, August 18, 2011
Here We Go Again: Europe, US Equity Markets Smashed
Like a pop band performing an encore number, the wild, swing days of last week are here with us again, doing a sophisticated limbo beneath the various 200-day moving averages. The continent formerly known as Europe slowly is sinking into a combination of economic atrophy and social anarchy while the country previously preferred to as the greatest democracy ever invented, the USA, shifts and contorts like a belly dancer with stomach cramps and gas.
One could take their pick today from a generous selection of tawdry economic news and data, beginning with the story reported by Zero Hedge that an unnamed European bank (speculation is that its either Societe General or an Italian or Austrian bank) borrowed $500 million from the ECB's emergency lending window at a 1.1% rate.
That got the entertainment kicked off in Europe with a notable bang, as the major bourses in the land of socialism held blood-letting sessions with the national indices down between 4 and 6%, Germany's DAX leading the way lower with a 5.82% decline.
By the time markets opened in New York, futures were careening headlong into the abyss after initial unemployment claims were reported at 408,000 in the most recent reporting period and July CPI came in with a whopping 0.5% rise - a 6% annualized inflation rate - which took almost everybody - except possibly President Obama, who was preparing for a two-week stay at Martha's Vineyard - by surprise, especially after Fed Chairman Ben Bernanke told us all that inflationary pressures were "transitory" (he also confided to Representative and presidential candidate Ron Paul that gold was not money... such a witty fellow).
Were that not enough for the market to digest, a couple more tasty morsels were delivered just a half hour into the trading session. Existing home sales for July were reported at an annualized rate of 4.67 million, after a 4.84 million read last month, but the real hot pepper came from the Philadelphia Fed's Manufacturing Index, which, after posting a tepid 3.2 reading in July, came in - on expectations of a 1.0 reading - at... wait for it... minus 30.7 (yes, -30.7), the lowest number in 2 1/2 years and now on scale with New York's Empire Index which last week posted an equally disturbing negative read of -7.7 on Monday.
Naturally, nobody gave a whit about the New York number, but the Philly fiasco was just too magnificent to ignore. Stocks, already down significantly, swiftly dove further, with the Dow Jones Industrials losing 170 points in the ten minutes following the double dose of decrepitude.
The sudden collapse of index prices was stunning to view, though the gaping maws of CNBC's on-air personalities provided dark comic relief. Stocks drifted for the rest of the day, but managed to stage a last-ditch rally with just ten minutes left in the session, boosting the Dow about 100 points into the close, just in time for options expiry on Friday.
Dow 10,990.58, -419.63 (3.68%)
NASDAQ 2,380.43, -131.05 (5.22%)
S&P 500 1,140.65, -53.24 (4.46%)
NYSE Composite 7,079.41, -339.53 (4.58%)
Declining issues decimated advancers, 6094-634, a nearly 10:1 ratio. New lows overpowered new highs on the NASDAQ, 253-2 (yes, two, as in 2 new 52-week highs), while on the NYSE there were also just two (2) new highs, against 208 new lows. The combined figure of 4 new highs and 461 new lows verifies our repeated suggestion that the highs-lows indicator is as reliable a simple instrument as is available and is currently suggesting that the now-confirmed market correction will shortly morph into a a full blown bear market as Europe and the United State plunge into the fearsome double-dip recession, if not already there.
Volume, despite the ridiculous assumptions made throughout the day by CNBC's dapper Bob Pisani (I really do watch too much TV) that today's volume was not significant, was, in fact, quite strong, and with good reason, as banks in Europe and the US took the brunt of the selloff. European banks were hardest hit, with losses between 6 and 11% on the day.
NASDAQ Volume 2,785,477,500
NYSE Volume 7,141,215,000
Meanwhile, the oil crazies were unloading their gooey stuff as quickly as possible, sending WTI futures down nearly six percent, dropping $5.20, to $82.38.
There were bright spots, and those were in precious metals. Gold rocketed $28.20 to another record price of $1,822.00, while silver tried desperately to keep pace, gaining 38 cents, to $40.69.
As for Friday, one should expect a little more of the same, though it is worth noting that these wickedly manipulated markets have a penchant for turning on a dime, as they did last week. Eventually, however, this all ends in tears, as the Euro will be soon dispatched to currency hell, where it belongs, taking the world economy into a place nobody wants to be.
Smoke 'em if you got 'em and live it up while you can. By Christmas, this could be really, really, really, really, really, and I do mean really, ugly.
One could take their pick today from a generous selection of tawdry economic news and data, beginning with the story reported by Zero Hedge that an unnamed European bank (speculation is that its either Societe General or an Italian or Austrian bank) borrowed $500 million from the ECB's emergency lending window at a 1.1% rate.
That got the entertainment kicked off in Europe with a notable bang, as the major bourses in the land of socialism held blood-letting sessions with the national indices down between 4 and 6%, Germany's DAX leading the way lower with a 5.82% decline.
By the time markets opened in New York, futures were careening headlong into the abyss after initial unemployment claims were reported at 408,000 in the most recent reporting period and July CPI came in with a whopping 0.5% rise - a 6% annualized inflation rate - which took almost everybody - except possibly President Obama, who was preparing for a two-week stay at Martha's Vineyard - by surprise, especially after Fed Chairman Ben Bernanke told us all that inflationary pressures were "transitory" (he also confided to Representative and presidential candidate Ron Paul that gold was not money... such a witty fellow).
Were that not enough for the market to digest, a couple more tasty morsels were delivered just a half hour into the trading session. Existing home sales for July were reported at an annualized rate of 4.67 million, after a 4.84 million read last month, but the real hot pepper came from the Philadelphia Fed's Manufacturing Index, which, after posting a tepid 3.2 reading in July, came in - on expectations of a 1.0 reading - at... wait for it... minus 30.7 (yes, -30.7), the lowest number in 2 1/2 years and now on scale with New York's Empire Index which last week posted an equally disturbing negative read of -7.7 on Monday.
Naturally, nobody gave a whit about the New York number, but the Philly fiasco was just too magnificent to ignore. Stocks, already down significantly, swiftly dove further, with the Dow Jones Industrials losing 170 points in the ten minutes following the double dose of decrepitude.
The sudden collapse of index prices was stunning to view, though the gaping maws of CNBC's on-air personalities provided dark comic relief. Stocks drifted for the rest of the day, but managed to stage a last-ditch rally with just ten minutes left in the session, boosting the Dow about 100 points into the close, just in time for options expiry on Friday.
Dow 10,990.58, -419.63 (3.68%)
NASDAQ 2,380.43, -131.05 (5.22%)
S&P 500 1,140.65, -53.24 (4.46%)
NYSE Composite 7,079.41, -339.53 (4.58%)
Declining issues decimated advancers, 6094-634, a nearly 10:1 ratio. New lows overpowered new highs on the NASDAQ, 253-2 (yes, two, as in 2 new 52-week highs), while on the NYSE there were also just two (2) new highs, against 208 new lows. The combined figure of 4 new highs and 461 new lows verifies our repeated suggestion that the highs-lows indicator is as reliable a simple instrument as is available and is currently suggesting that the now-confirmed market correction will shortly morph into a a full blown bear market as Europe and the United State plunge into the fearsome double-dip recession, if not already there.
Volume, despite the ridiculous assumptions made throughout the day by CNBC's dapper Bob Pisani (I really do watch too much TV) that today's volume was not significant, was, in fact, quite strong, and with good reason, as banks in Europe and the US took the brunt of the selloff. European banks were hardest hit, with losses between 6 and 11% on the day.
NASDAQ Volume 2,785,477,500
NYSE Volume 7,141,215,000
Meanwhile, the oil crazies were unloading their gooey stuff as quickly as possible, sending WTI futures down nearly six percent, dropping $5.20, to $82.38.
There were bright spots, and those were in precious metals. Gold rocketed $28.20 to another record price of $1,822.00, while silver tried desperately to keep pace, gaining 38 cents, to $40.69.
As for Friday, one should expect a little more of the same, though it is worth noting that these wickedly manipulated markets have a penchant for turning on a dime, as they did last week. Eventually, however, this all ends in tears, as the Euro will be soon dispatched to currency hell, where it belongs, taking the world economy into a place nobody wants to be.
Smoke 'em if you got 'em and live it up while you can. By Christmas, this could be really, really, really, really, really, and I do mean really, ugly.
Friday, June 10, 2011
Stocks Down for Sixth Straight Week; Worst Since 2002
Whatever happened to the recovery? All of a sudden, nobody on Wall Street or in Washington is talking about "green shoots", improvement, growth or any of the associated nonsense that went along with the previous two years' worth of stimulus, easy Fed policy, bailouts and handouts.
But who's counting, anyway? Stocks fell for the sixth straight week, and, due to a sudden turnaround at 2:00 pm in the financial sector, the day's losses could have - and should have - been a whole lot worse. By now, the only people who don't know that we're in the throes of pure economic upheaval in its most base form - that of currency destruction - are the President (who took off early today, heading for a weekend at Camp David) and Larry Kudlow, who said last night on his CNBC show, The Kudlow Report, that he thought the "correction had run its course."
Naturally, both Larry and Mr. Obama are clueless, or hiding behind the facade of officialdom, because what's weighing most on stocks these days is the total distaste and/or disregard for all manner of equities by the general public. It should be apparent that most Americans either don't have the money to invest in stocks or have, and not liking the results, are completely out of the paper market and turning to cash, gold, silver, art, collectibles, or other commodities.
Nobody likes Wall Street's paper except Wall Street, and that's a fact well-known to anybody who's been following these things for more than the past couple of months. Wall Street paper is made up by Wall Street, distributed among themselves, and bought, sold, sliced and diced as many ways as humanly (or by computer) possible... until... there's nobody else to take the paper, and that's the condition we have today.
What other reason could there be for such a massive sell-off on such paltry, absolutely slush-fund-looking volume? The churn upwards has reversed course and the majors are now going to eat each other in a massive orgy of short-selling all the way to the bottom, wherever that might be.
In months ahead, look for blown up hedge funds, even more absurdly-underfunded pension funds and the near complete collapse of Wall Street's most-favored institutions. Some contend that the great unwind has already commenced, begun in earnest in 2007, completed in 2008 and the Spring of 2009. All that's occurred since has been a perverse show with no underlying value.
Whatever the case, stocks are no place to park money right now, and probably won't be for another few years, as the masters of the universe scramble to hold onto what little is left of the markets and the US economy.
A couple of side notes to benefit those who didn't see the carnage:
From Barron's Blog: "Financial stocks were falling in early trading, but shot up around 2 p.m. after CNBC reported that capital requirements for big banks will likely be less onerous than the market had been expecting."
That's just what we need, more leverage and easier capital requirements for the world's biggest banks. My, oh, my, what great leverage you have. Might as well make it 1000-1 and blow everything up.
Zero Hedge reports: Fed releases final POMO schedule of $60 billion.
Well, let's see how stocks fare without free money. Anybody not dreading July - the end of the Fed's slimy handouts to the banks - is living in a dream world, which would include 90% of the global population.
So, down we go. BTW: there have been other declines of six straight weeks, but the last one was in 2002. See you on the other side, if there is another side to this horrible story.
Dow 11,951.91, -172.45 (1.42%)
NASDAQ 2,643.73, -41.14 (1.53%)
S&P 500 1,270.98, -18.02 (1.40%)
NYSE Composite 8,016.39, -133.26 (1.64%)
As expected, declining issues buried advancing ones, 4462-1202. Our favorite indicator showed even more trouble ahead. New highs on the NASDAQ were subsumed by new lows, 24-163. On the NYSE, there were only 20 new highs and 95 new lows, which makes the combined total the worst since the lows overtook the highs, six sessions ago, 44-258. If history is any guide - and it's usually a good one - this indicator will not turn over for at least six months, probably longer. Once either the new highs or new lows take an edge, it's generally for an extended period. For instance, new highs held sway over new lows on a daily basis for nearly two years before this most recent change.
Volume was again pathetic. Calling it light would be quite the understatement.
NASDAQ Volume 1,978,513,625
NYSE Volume 3,972,811,750
In today's great downdraft, commodities didn't fare any better, WTI crude futures on the NYMEX tumbled $2.64, to $99.29. Gold was taken down $12.20, to $1532.10, if only because of fund managers scrambling to meet margin calls. Silver took the worst of the action, falling $1.37, to $36.20 per ounce.
Putting the recent slide into perspective, since April 29, the Dow Jones Industrial Average has fallen by 858 points, still closing in on official correction territory, soon to become bear market territory. The Dow is less than 400 points from falling into negative territory for the year. The NASDAQ is already sporting a decline for all of 2011, closing today about nine points lower than where it ended 2010. It's lost 200 points since the market top, April 29.
As for the S&P, it's 93 points down over the past six weeks and is up a mere 13 points for the entire year. Time wasted, indeed. Does anyone now think that bailing out the too-big-to-fail banks was a good idea? Had the government done what was proper - that being nothing - and allowed the banks to go under and reorganize in other mysterious forms, the global economy would most likely be booming right now. Instead, we have a global catastrophe completely of their own making which is falling down upon their heads.
A pox on all their houses. Kick a banker to the curb today. They've been doing it to us since 1913.
But who's counting, anyway? Stocks fell for the sixth straight week, and, due to a sudden turnaround at 2:00 pm in the financial sector, the day's losses could have - and should have - been a whole lot worse. By now, the only people who don't know that we're in the throes of pure economic upheaval in its most base form - that of currency destruction - are the President (who took off early today, heading for a weekend at Camp David) and Larry Kudlow, who said last night on his CNBC show, The Kudlow Report, that he thought the "correction had run its course."
Naturally, both Larry and Mr. Obama are clueless, or hiding behind the facade of officialdom, because what's weighing most on stocks these days is the total distaste and/or disregard for all manner of equities by the general public. It should be apparent that most Americans either don't have the money to invest in stocks or have, and not liking the results, are completely out of the paper market and turning to cash, gold, silver, art, collectibles, or other commodities.
Nobody likes Wall Street's paper except Wall Street, and that's a fact well-known to anybody who's been following these things for more than the past couple of months. Wall Street paper is made up by Wall Street, distributed among themselves, and bought, sold, sliced and diced as many ways as humanly (or by computer) possible... until... there's nobody else to take the paper, and that's the condition we have today.
What other reason could there be for such a massive sell-off on such paltry, absolutely slush-fund-looking volume? The churn upwards has reversed course and the majors are now going to eat each other in a massive orgy of short-selling all the way to the bottom, wherever that might be.
In months ahead, look for blown up hedge funds, even more absurdly-underfunded pension funds and the near complete collapse of Wall Street's most-favored institutions. Some contend that the great unwind has already commenced, begun in earnest in 2007, completed in 2008 and the Spring of 2009. All that's occurred since has been a perverse show with no underlying value.
Whatever the case, stocks are no place to park money right now, and probably won't be for another few years, as the masters of the universe scramble to hold onto what little is left of the markets and the US economy.
A couple of side notes to benefit those who didn't see the carnage:
From Barron's Blog: "Financial stocks were falling in early trading, but shot up around 2 p.m. after CNBC reported that capital requirements for big banks will likely be less onerous than the market had been expecting."
That's just what we need, more leverage and easier capital requirements for the world's biggest banks. My, oh, my, what great leverage you have. Might as well make it 1000-1 and blow everything up.
Zero Hedge reports: Fed releases final POMO schedule of $60 billion.
Well, let's see how stocks fare without free money. Anybody not dreading July - the end of the Fed's slimy handouts to the banks - is living in a dream world, which would include 90% of the global population.
So, down we go. BTW: there have been other declines of six straight weeks, but the last one was in 2002. See you on the other side, if there is another side to this horrible story.
Dow 11,951.91, -172.45 (1.42%)
NASDAQ 2,643.73, -41.14 (1.53%)
S&P 500 1,270.98, -18.02 (1.40%)
NYSE Composite 8,016.39, -133.26 (1.64%)
As expected, declining issues buried advancing ones, 4462-1202. Our favorite indicator showed even more trouble ahead. New highs on the NASDAQ were subsumed by new lows, 24-163. On the NYSE, there were only 20 new highs and 95 new lows, which makes the combined total the worst since the lows overtook the highs, six sessions ago, 44-258. If history is any guide - and it's usually a good one - this indicator will not turn over for at least six months, probably longer. Once either the new highs or new lows take an edge, it's generally for an extended period. For instance, new highs held sway over new lows on a daily basis for nearly two years before this most recent change.
Volume was again pathetic. Calling it light would be quite the understatement.
NASDAQ Volume 1,978,513,625
NYSE Volume 3,972,811,750
In today's great downdraft, commodities didn't fare any better, WTI crude futures on the NYMEX tumbled $2.64, to $99.29. Gold was taken down $12.20, to $1532.10, if only because of fund managers scrambling to meet margin calls. Silver took the worst of the action, falling $1.37, to $36.20 per ounce.
Putting the recent slide into perspective, since April 29, the Dow Jones Industrial Average has fallen by 858 points, still closing in on official correction territory, soon to become bear market territory. The Dow is less than 400 points from falling into negative territory for the year. The NASDAQ is already sporting a decline for all of 2011, closing today about nine points lower than where it ended 2010. It's lost 200 points since the market top, April 29.
As for the S&P, it's 93 points down over the past six weeks and is up a mere 13 points for the entire year. Time wasted, indeed. Does anyone now think that bailing out the too-big-to-fail banks was a good idea? Had the government done what was proper - that being nothing - and allowed the banks to go under and reorganize in other mysterious forms, the global economy would most likely be booming right now. Instead, we have a global catastrophe completely of their own making which is falling down upon their heads.
A pox on all their houses. Kick a banker to the curb today. They've been doing it to us since 1913.
Friday, May 13, 2011
Correlation Trade: Dollar Up, Stocks Down
After a roller coaster type of week, the major indices and commodities ended fairly flat, but that's how the skimmers of Wall Street make their dough: bidding prices up and selling out underneath momentum buyers. This is a fun game for them, not so nice for individual investors, but eventually all the trades will go in one direction and it won't be good for anyone except committed short sellers.
Stocks really got off to a piddling start, but accelerated mid-day, with the Dow down as much as 150 points. While the Dow rallied into the close a bit, the NASDAQ stayed down at finished at its low point of the session.
April CPI was a non-event, coming in at expectations of 0.4% gain for April. Michigan Consumer Sentiment showed a small rise, to 72.4, from 69.8 in March. Despite the steep drops on the averages, it was, all tolled, a pretty dull session. The major trade consisted of shedding stocks (risk) as the dollar advanced, closing at 75.793, up 0.60 as measured by the Dollar Index. It's become the most reliable correlation trade: dollar up, stocks down.
Dow 12,595.75, -100.17 (0.79%)
NASDAQ 2,828.47, -34.57 (1.21%)
S&P 500 1,337.77, -10.88 (0.81%)
NYSE Composite 8,371.67, -84.51 (1.00%)
Declining issues roared past advancers, 4790-1789. On the NASDAQ, the gap tightened with 97 new highs and 51 new lows. A similar situation prevailed on the NYSE with 182 new highs topping 22 new lows. Volume was back in the doldrums, signaling the beginning of the summer season, with traders taking off early and heading for the hills, the Hamptons, or Hades.
NASDAQ Volume 1,885,009,375
NYSE Volume 3,921,132,750
Commodities put in an equally lackluster performance, though most were trending lower through much of the day. WTI crude oil on the NYMEX, down most of the session, caught a bid late in the day, finishing up 68 cents, at $99.65. Gold was swamped today, losing $13.10, to $1493.80, while silver managed to eek out a small, 64 cent gain, at $35.26.
There was a lot of posturing and positioning, but no real commitment on the buy side. Sellers won the day and the week as we inch ever closer to the end of QE2.
Finally, financial stocks took the brunt of the selling, with Bank of America (BAC) down 27 cents, to 11.93, Citigroup (C) shedding 89 cents, to $41.53 despite declaring a .01 annual dividend. Apparently, investors were not impressed. JP Morgan Chase (JPM) lost 94 cents, to $43.15 and Goldman Sachs (GS) dipping 1.29 to 141.46.
Continued pressure on the banking sector is symptomatic of the sluggish economy and may portend another round of trouble for the mega-banks. Couldn't happen to a nicer bunch.
Stocks really got off to a piddling start, but accelerated mid-day, with the Dow down as much as 150 points. While the Dow rallied into the close a bit, the NASDAQ stayed down at finished at its low point of the session.
April CPI was a non-event, coming in at expectations of 0.4% gain for April. Michigan Consumer Sentiment showed a small rise, to 72.4, from 69.8 in March. Despite the steep drops on the averages, it was, all tolled, a pretty dull session. The major trade consisted of shedding stocks (risk) as the dollar advanced, closing at 75.793, up 0.60 as measured by the Dollar Index. It's become the most reliable correlation trade: dollar up, stocks down.
Dow 12,595.75, -100.17 (0.79%)
NASDAQ 2,828.47, -34.57 (1.21%)
S&P 500 1,337.77, -10.88 (0.81%)
NYSE Composite 8,371.67, -84.51 (1.00%)
Declining issues roared past advancers, 4790-1789. On the NASDAQ, the gap tightened with 97 new highs and 51 new lows. A similar situation prevailed on the NYSE with 182 new highs topping 22 new lows. Volume was back in the doldrums, signaling the beginning of the summer season, with traders taking off early and heading for the hills, the Hamptons, or Hades.
NASDAQ Volume 1,885,009,375
NYSE Volume 3,921,132,750
Commodities put in an equally lackluster performance, though most were trending lower through much of the day. WTI crude oil on the NYMEX, down most of the session, caught a bid late in the day, finishing up 68 cents, at $99.65. Gold was swamped today, losing $13.10, to $1493.80, while silver managed to eek out a small, 64 cent gain, at $35.26.
There was a lot of posturing and positioning, but no real commitment on the buy side. Sellers won the day and the week as we inch ever closer to the end of QE2.
Finally, financial stocks took the brunt of the selling, with Bank of America (BAC) down 27 cents, to 11.93, Citigroup (C) shedding 89 cents, to $41.53 despite declaring a .01 annual dividend. Apparently, investors were not impressed. JP Morgan Chase (JPM) lost 94 cents, to $43.15 and Goldman Sachs (GS) dipping 1.29 to 141.46.
Continued pressure on the banking sector is symptomatic of the sluggish economy and may portend another round of trouble for the mega-banks. Couldn't happen to a nicer bunch.
Massive Disconnect in Markets
Apologies for the tardiness of this posting. At press time, Blogger - the system we love and use for posting this blog - was down for unexpected maintenance, at 3:30 pm EDT, on Thursday, May 12. We also note that Blogger lost our post from May 11, 2011, and, since it was created completely upon their system, cannot say with any level of assuredness whether or not it will be restored. At this point, it is permanently gone. Our regular post for Friday, May 13, will (God and Blogger willing) be posted shortly after close of trading, about 4:45 pm EDT.
More of the same from the people who brought you "Financial Suicide 101" (2008) and "How to Jack Economies Worldwide" (2009-11), the genii of Wall Street and their willing government henchmen today took a look at unmistakenly miserable data from fresh unemployment claims filings (434,000) and turned a market that was selling off into another miracle rally.
On top of that April PPI came in at 0.8%, highly inflationary and retail sales disappointed, registering a gain of 0.5% when the estimate was for 0.6%, revised lower from 0.7%. Truthfully, most of the 1/2 per cent of retail gains were due to nothing more than higher prices. There is no growth in the US economy and hasn't been for a while.
The games and maneuvers of these criminal elite which operate on Wall Street are truly breath-taking and never ending. When the Dow was down 90 points and the NASDAQ off 27, shortly after the opening bell, these guileless bastards just began pumping fresh POMO money into the dead carcass that is the US stock market, as though the economy were performing just dandily and those new jobless claims were merely a tick to be brushed aside with a swat of the hand.
What we have here is a massive disconnect which has prevailed since well before the financial catastrophe of 2008 between Wall Street and the rest of the world. In reality, the world would have been a far better place had Osoma bin Laden done a better job and eradicated more of the sniveling, greedy, sociopathic slime that has infested our markets and destroyed not only the US economy, but that of Europe and a handful of other nations.
The egregious crimes committed before during and after the sub-prime meltdown that exploded into a full blown $700 billion heist known as TARP still have not been addressed, no one has answered for this disaster, and to this day, banks such as Bank of America, Citigroup, JP Morgan Chase and Wells-Fargo have continued to conceal their losses behind corrupt, dubious accounting rules, off-balance sheet transactions and trillions of Fed-pumped dollars to boost their bottom lines and hike up momentum stocks to unbelievable, unsustainable valuations.
The biggest banks still cannot lend, cannot process foreclosures without falsifying documents and are routinely charging credit-worthy customers usury rates on credit cards. Even still, they whine and complain after having been bailed out by the government (read: taxpayers) about every little detail that might make their miserable existence even the tiniest bit more fair toward consumers.
Make no doubt about it. These cretins who sit in the executive suites atop the largest financial institutions in the world are still in the process of raping and pillaging one "investor", one "consumer" at a time. If they had it their way, they'd just have their flunkies in congress pass new laws that mandate that all Americans submit all of their money to them, while in many ways, they already have, through control of investment trusts, pension and retirement funds, municipal bonds and a variety of other means - like JP Morgan Chase's easy money scam for administering the SNAP (food stamp) program nationwide.
Today's market action and many other days before it - and surely more to come - is just another example of how ludicrous is their game of "chicken" with markets that are essentially dead and have been for nearly three years. If there was a way to remove the parasitical banks, insurance companies, and other so-called "facilitators" from the scene, our markets would once again return to health and there is a small chance that we might even survive the long-term, generational damage they have bestowed on us and citizens across the globe.
Continual goosing of the stock markets with funny money from the Fed will no doubt leave a legacy of destruction in its aftermath. Because the American economy is so tightly wound around the major financial institutions, extrication from the iron fist of Wall Street and Washington is going to be a painful and unsteady process, but it begins with Americans who have stopped believing and are getting out of stocks, 401k plans, college funds, retirement funds, and all manner of paper investments. Sadly, there is fresh money from new sheep to be sheared, so the game continues and we sink, as a society and as a nation, further and further down the past to insolvency, destitution and eventual destruction of all the principles, laws and common decency that made us a great nation.
America is either already dead or dying a slow, agonizing death. Indictments and criminal prosecutions should have happened two or three years ago, but they can still happen, if people demand that they do.
Write to your congressman or woman. Take your money out of the big, national banks. Liquidate your IRAs, 401ks and other investment vehicles. Leave them for dead, because, in reality, they already are.
Dow 12,695.92, +65.89 (0.52%)
NASDAQ 2,863.04, +17.98 (0.63%)
S&P 500 1,348.65, +6.57 (0.49%)
NYSE Composite 8,456.18, +28.09 (0.33%)
Advancing issues swamped decliners, 4199-2408. NASDAQ new highs: 113; new lows: 55. NYSE new highs: 172; new lows: 36. Make note that new lows have been rising or steady in recent weeks. There are fewer than 30 trading days remaining before the planned end of QE2 and the rats are jumping off the stock market ship. Volume was higher today as it takes more stock trades to save a market from imminent collapse.
NASDAQ Volume 2,233,589,000
NYSE Volume 4,241,912,500
Commodities were whipsawed once again. Crude oil futures finished up 78 cents, at $98.97, but not before some uncertainty in the morning which had futures down 10 cents.
Gold finished up $6.00, at $1506.90 and silver lost 45 cents, to $34.62, but was down briefly below $33 per ounce.
Thankfully, tomorrow ends another week, and the University of Michigan presents its monthly consumer sentiment survey, plus April CPI. It is Friday the 13th, however, so expect more than the usual wild swings, lies and obfuscation.
More of the same from the people who brought you "Financial Suicide 101" (2008) and "How to Jack Economies Worldwide" (2009-11), the genii of Wall Street and their willing government henchmen today took a look at unmistakenly miserable data from fresh unemployment claims filings (434,000) and turned a market that was selling off into another miracle rally.
On top of that April PPI came in at 0.8%, highly inflationary and retail sales disappointed, registering a gain of 0.5% when the estimate was for 0.6%, revised lower from 0.7%. Truthfully, most of the 1/2 per cent of retail gains were due to nothing more than higher prices. There is no growth in the US economy and hasn't been for a while.
The games and maneuvers of these criminal elite which operate on Wall Street are truly breath-taking and never ending. When the Dow was down 90 points and the NASDAQ off 27, shortly after the opening bell, these guileless bastards just began pumping fresh POMO money into the dead carcass that is the US stock market, as though the economy were performing just dandily and those new jobless claims were merely a tick to be brushed aside with a swat of the hand.
What we have here is a massive disconnect which has prevailed since well before the financial catastrophe of 2008 between Wall Street and the rest of the world. In reality, the world would have been a far better place had Osoma bin Laden done a better job and eradicated more of the sniveling, greedy, sociopathic slime that has infested our markets and destroyed not only the US economy, but that of Europe and a handful of other nations.
The egregious crimes committed before during and after the sub-prime meltdown that exploded into a full blown $700 billion heist known as TARP still have not been addressed, no one has answered for this disaster, and to this day, banks such as Bank of America, Citigroup, JP Morgan Chase and Wells-Fargo have continued to conceal their losses behind corrupt, dubious accounting rules, off-balance sheet transactions and trillions of Fed-pumped dollars to boost their bottom lines and hike up momentum stocks to unbelievable, unsustainable valuations.
The biggest banks still cannot lend, cannot process foreclosures without falsifying documents and are routinely charging credit-worthy customers usury rates on credit cards. Even still, they whine and complain after having been bailed out by the government (read: taxpayers) about every little detail that might make their miserable existence even the tiniest bit more fair toward consumers.
Make no doubt about it. These cretins who sit in the executive suites atop the largest financial institutions in the world are still in the process of raping and pillaging one "investor", one "consumer" at a time. If they had it their way, they'd just have their flunkies in congress pass new laws that mandate that all Americans submit all of their money to them, while in many ways, they already have, through control of investment trusts, pension and retirement funds, municipal bonds and a variety of other means - like JP Morgan Chase's easy money scam for administering the SNAP (food stamp) program nationwide.
Today's market action and many other days before it - and surely more to come - is just another example of how ludicrous is their game of "chicken" with markets that are essentially dead and have been for nearly three years. If there was a way to remove the parasitical banks, insurance companies, and other so-called "facilitators" from the scene, our markets would once again return to health and there is a small chance that we might even survive the long-term, generational damage they have bestowed on us and citizens across the globe.
Continual goosing of the stock markets with funny money from the Fed will no doubt leave a legacy of destruction in its aftermath. Because the American economy is so tightly wound around the major financial institutions, extrication from the iron fist of Wall Street and Washington is going to be a painful and unsteady process, but it begins with Americans who have stopped believing and are getting out of stocks, 401k plans, college funds, retirement funds, and all manner of paper investments. Sadly, there is fresh money from new sheep to be sheared, so the game continues and we sink, as a society and as a nation, further and further down the past to insolvency, destitution and eventual destruction of all the principles, laws and common decency that made us a great nation.
America is either already dead or dying a slow, agonizing death. Indictments and criminal prosecutions should have happened two or three years ago, but they can still happen, if people demand that they do.
Write to your congressman or woman. Take your money out of the big, national banks. Liquidate your IRAs, 401ks and other investment vehicles. Leave them for dead, because, in reality, they already are.
Dow 12,695.92, +65.89 (0.52%)
NASDAQ 2,863.04, +17.98 (0.63%)
S&P 500 1,348.65, +6.57 (0.49%)
NYSE Composite 8,456.18, +28.09 (0.33%)
Advancing issues swamped decliners, 4199-2408. NASDAQ new highs: 113; new lows: 55. NYSE new highs: 172; new lows: 36. Make note that new lows have been rising or steady in recent weeks. There are fewer than 30 trading days remaining before the planned end of QE2 and the rats are jumping off the stock market ship. Volume was higher today as it takes more stock trades to save a market from imminent collapse.
NASDAQ Volume 2,233,589,000
NYSE Volume 4,241,912,500
Commodities were whipsawed once again. Crude oil futures finished up 78 cents, at $98.97, but not before some uncertainty in the morning which had futures down 10 cents.
Gold finished up $6.00, at $1506.90 and silver lost 45 cents, to $34.62, but was down briefly below $33 per ounce.
Thankfully, tomorrow ends another week, and the University of Michigan presents its monthly consumer sentiment survey, plus April CPI. It is Friday the 13th, however, so expect more than the usual wild swings, lies and obfuscation.
Thursday, March 10, 2011
It's Not as Good as They're Saying; Lows-Highs Flip
To anyone who follows capital markets and the world of high finance closely, the material deficiencies in the US and global "growth" stories are glaring and have been for many months. While the financial press - CNBC, the Wall Street Journal, Bloomberg - and the spokespeople for the various central governments around the world continue to feed the public the "recovery" fable, the facts, now beginning to see the light of day, contend that the global economy is still, two-and-a-half years after the grand cascading crash of 2008, in precarious straits.
Five separate stories sealed the fate for global markets today, beginning with China's announcement late Wednesday night (in America) that their trade balance was negative for the month of February.
About the same time, RealtyTrac delivered news that foreclosures had come to nearly a halt in the United States, with their numbers for February dropping 14 percent from the previous month and a 27 percent decrease from February 2010. Normally, that would be good news, but in the current environment of illegal and unethical actions by large, foreclosing banks, it meant that the mess that began in October, 2010 with the robo-signing scandal, was keeping banks from courthouses and clogging up the real estate market in a worsening manner.
Prior to the market opening, two more news items spooked the investment community. First, Moody's downgraded Spain's debt (about time for that!) to Aa2 and then, at 8:30 am on the East coast, the double whammy of new unemployment claims (397,000) and the US trade deficit, which expanded to -$46.3 billion in January.
Then, in mid-afternoon, as if the market had not received enough bad news, a story out of Saudi Arabia said that protesters had been fired upon by government troops.
That final bit of news sent the major indices - which had recovered somewhat off the day's lows - down once more, and stocks finished the session breaking into new depths.
The Dow and S&P broke through various levels of support, with the Dow finishing under the 12,000 mark for the first time in two months and the S&P crashing through it's 55-DMA. The NASDAQ and NYSE Composite each suffered similar pain.
It's becoming plain and clear to everybody living in the real world - not the fantasy land of fund managers, politicians and central bankers - that things are not going so well. Housing is an absolute catastrophe, global trade is grinding down due to higher imput costs and soaring energy prices, Europe is a full-blown basket case on the brink of dissolving, and US stocks are so wickedly overvalued that the path of least resistance is to sell them all, hurriedly, on the first sign of negative news, and there certainly was plenty of that to go around today.
Dow 11,984.61, -228.48 (1.87%)
NASDAQ 2,701.02, -50.70 (1.84%)
S&P 500 1,295.11, -24.91 (1.89%)
NYSE Composite 8,200.07, -179.37 (2.14%)
Declining issues led advancers, 5501-1072, a ratio of better than 5:1. New highs on the NASDAQ were just 33, overtaken by 68 new lows. On the NYSE, just 27 new highs and 31 new lows. This is a critical juncture for the markets, because if the number of new lows remain higher than new highs on a daily basis for long, say, six to eight trading days, it would confirm a hard change of direction, which has been in the cards since the double-engulfing session last Tuesday.
Volume was elevated as is the usual case when sellers outnumber buyers.
NASDAQ Volume 2,374,073,000
NYSE Volume 5,320,324,500
Commodities also took it on the chin, though in not such a dramatic fashion as stocks. Crude oil futures on the NYMEX fell $1.68, to $102.70, due to massive oversupply in the US of unrefined crude. Gold slipped $17.10, but remained below the psychologically-important $1400 level, ending the day at $1,412.50. Silver also was sold off, losing $98 cents, to finish at $35.07, though it should be noted that on days of hard reversals, a lot of precious metals are liquidated by speculators to cover margin calls.
A final note should not be ignored. Bill Gross' PIMCO, the world's largest fixed income family of funds, has slashed its holdings of Treasuries to ZERO. This news, first reported by the avant garde financial blog, zerohedge.com, holds unknown, but potentially damaging conditions. Gross and PIMCO have more or less registered a vote of "no confidence" on the policies of the US government and the Federal Reserve Corporation.
With stocks hammered down repeatedly over the past two weeks, the highs of February 18 look like specs on the horizon and the truth about the real conditions in the global and US markets is finally coming out. The cataclysm begun by the Wall Street banks in 2003-2006 and accelerated by then-Treasury Secretary's $700 billion holdup of the US mint in October, 2008, has many more acts still to be played out.
The rush for the exits began a week ago and the passageway out is beginning to get quite crowded.
Five separate stories sealed the fate for global markets today, beginning with China's announcement late Wednesday night (in America) that their trade balance was negative for the month of February.
About the same time, RealtyTrac delivered news that foreclosures had come to nearly a halt in the United States, with their numbers for February dropping 14 percent from the previous month and a 27 percent decrease from February 2010. Normally, that would be good news, but in the current environment of illegal and unethical actions by large, foreclosing banks, it meant that the mess that began in October, 2010 with the robo-signing scandal, was keeping banks from courthouses and clogging up the real estate market in a worsening manner.
Prior to the market opening, two more news items spooked the investment community. First, Moody's downgraded Spain's debt (about time for that!) to Aa2 and then, at 8:30 am on the East coast, the double whammy of new unemployment claims (397,000) and the US trade deficit, which expanded to -$46.3 billion in January.
Then, in mid-afternoon, as if the market had not received enough bad news, a story out of Saudi Arabia said that protesters had been fired upon by government troops.
That final bit of news sent the major indices - which had recovered somewhat off the day's lows - down once more, and stocks finished the session breaking into new depths.
The Dow and S&P broke through various levels of support, with the Dow finishing under the 12,000 mark for the first time in two months and the S&P crashing through it's 55-DMA. The NASDAQ and NYSE Composite each suffered similar pain.
It's becoming plain and clear to everybody living in the real world - not the fantasy land of fund managers, politicians and central bankers - that things are not going so well. Housing is an absolute catastrophe, global trade is grinding down due to higher imput costs and soaring energy prices, Europe is a full-blown basket case on the brink of dissolving, and US stocks are so wickedly overvalued that the path of least resistance is to sell them all, hurriedly, on the first sign of negative news, and there certainly was plenty of that to go around today.
Dow 11,984.61, -228.48 (1.87%)
NASDAQ 2,701.02, -50.70 (1.84%)
S&P 500 1,295.11, -24.91 (1.89%)
NYSE Composite 8,200.07, -179.37 (2.14%)
Declining issues led advancers, 5501-1072, a ratio of better than 5:1. New highs on the NASDAQ were just 33, overtaken by 68 new lows. On the NYSE, just 27 new highs and 31 new lows. This is a critical juncture for the markets, because if the number of new lows remain higher than new highs on a daily basis for long, say, six to eight trading days, it would confirm a hard change of direction, which has been in the cards since the double-engulfing session last Tuesday.
Volume was elevated as is the usual case when sellers outnumber buyers.
NASDAQ Volume 2,374,073,000
NYSE Volume 5,320,324,500
Commodities also took it on the chin, though in not such a dramatic fashion as stocks. Crude oil futures on the NYMEX fell $1.68, to $102.70, due to massive oversupply in the US of unrefined crude. Gold slipped $17.10, but remained below the psychologically-important $1400 level, ending the day at $1,412.50. Silver also was sold off, losing $98 cents, to finish at $35.07, though it should be noted that on days of hard reversals, a lot of precious metals are liquidated by speculators to cover margin calls.
A final note should not be ignored. Bill Gross' PIMCO, the world's largest fixed income family of funds, has slashed its holdings of Treasuries to ZERO. This news, first reported by the avant garde financial blog, zerohedge.com, holds unknown, but potentially damaging conditions. Gross and PIMCO have more or less registered a vote of "no confidence" on the policies of the US government and the Federal Reserve Corporation.
With stocks hammered down repeatedly over the past two weeks, the highs of February 18 look like specs on the horizon and the truth about the real conditions in the global and US markets is finally coming out. The cataclysm begun by the Wall Street banks in 2003-2006 and accelerated by then-Treasury Secretary's $700 billion holdup of the US mint in October, 2008, has many more acts still to be played out.
The rush for the exits began a week ago and the passageway out is beginning to get quite crowded.
Thursday, December 2, 2010
Short Sales Helpful, But Read the Fine Print
While the economy seems to be improving, though modestly, one area of concern remains the shattered real estate market, where home prices have tumbled, homeowners owe more than their house is worth - a condition known as being "upside down" - and the recent foreclosure moratoriums by mortgage servicers like Bank of America, Ally Bank and JP Morgan Chase have slowed the pace of residential real estate sales.
With unemployment close to 10%, many homeowners are facing foreclosure and looking for ways to get out from under a financial burden they did not anticipate. One such method is a real estate short sale, which is a process by which the homeowner sells the property back to the bank at a reduced price. This often results in a win for both sides, as the bank does not have to engage in the time-consuming and costly process of foreclosure and the homeowner walks away from the home and mortgage debt, usually without any residual amount owed, known in the industry as a "deficiency," that being the difference between the original amount owed and the amount of the short sale.
Most states provide for deficiency claims, and banks routinely take judgments against short sale sellers, so this is an area which needs to be negotiated with the lender beforehand, and the services of a lawyer, representing the short seller, are strongly advised. Banks don't like to take losses and will normally try to slip in a deficiency clause into a short sale agreement.
For further information, you can can click here to check for all kinds of sales - including short sales - in your area, or for sales nationwide and more information on all kinds of real estate transactions, click here.
With unemployment close to 10%, many homeowners are facing foreclosure and looking for ways to get out from under a financial burden they did not anticipate. One such method is a real estate short sale, which is a process by which the homeowner sells the property back to the bank at a reduced price. This often results in a win for both sides, as the bank does not have to engage in the time-consuming and costly process of foreclosure and the homeowner walks away from the home and mortgage debt, usually without any residual amount owed, known in the industry as a "deficiency," that being the difference between the original amount owed and the amount of the short sale.
Most states provide for deficiency claims, and banks routinely take judgments against short sale sellers, so this is an area which needs to be negotiated with the lender beforehand, and the services of a lawyer, representing the short seller, are strongly advised. Banks don't like to take losses and will normally try to slip in a deficiency clause into a short sale agreement.
For further information, you can can click here to check for all kinds of sales - including short sales - in your area, or for sales nationwide and more information on all kinds of real estate transactions, click here.
Wednesday, October 6, 2010
QE2, TARP2 Signal Beginning of End for Global Currencies
The mortgage/foreclosure mess created and exacerbated by the banks is still news, big news, but in the long run it is only a symptom of what is really crushing the global economy, and the US in particular.
That would be the failure of unwinding the toxic debt created by the nation's largest banks in the most magnificent swindle in the history of the world that not only allowed the banks and financial institutions to not only profit from their spendthrift, shifty, illegal ways, but to profit from it and then to prop it up when the house of cards began to crumble.
A report from the IMF released yesterday, calls for more quantitative easing by central banks and another round of bailouts for impaired, decrepit banks amounting to another $4 Trillion wasted on the very entities that started the entire mess, calling the banks the "Achilles Heel" of global recovery.
With apologies to the great Achilles, the banks aren't only the heel (though one could maintain that the bankers are "heels"), but the head, neck, shoulders, chest, torso, arms, legs, hands and feet of the financial crisis. They are all of it and they need to be forced to own up to their liabilities, stop the mockery of accounting known as mark to model and head directly into receivership or, more appropriately, to bankruptcy courts.
Not that it isn't where they're headed anyway, but this evil, crooked gang of thieves populating the banks and the halls of congress must not be allowed to rape and pillage the global economy one more day. If there's any time that the US public should be taking to the streets in protest, it is now, or, whenever they try to sneak the next bailout by us, for they truly cannot announce it very publicly or loudly.
There should be a minimum one year moratorium on all foreclosures, evictions and repossessions. Naturally, that will crush the real estate industry, but, at some point, there has to be a mechanism for price discovery. All the mortgages sold during the years 2003-2007 should be examined, documented and written down or forgiven, mostly to alleviate the strain on the courts and the public, but more realistically because the vast majority of these loans were originated under false pretenses or have been or are being foreclosed upon fraudulently, or both.
The banks and the note-holders will take significant hits to their bottom lines, but none could be more deserving. It's certainly a better solution than what's gone on for the past three years, a la foreclosure gone wild. Keeping people in homes, in communities, whether they're paying rent or mortgages or whether they have jobs or don't is the first step toward restoring the nation to some semblance of wholeness, though admittedly, it may already be too late, the pain and suffering inflicted on people and the economy are severely deep wounds which will not heal overnight.
We must, as a people and a nation, take positive steps toward recovery and that begins with thre truth finally being told about the banks, and the crimes they've committed. Most of the hot-shots running the major banks should already be behind bars, but we must start now before the statutes of limitations begin to expire.
No more bailouts, no more quantitative easing and maybe no more Federal Reserve. The time has come that desperate solutions are the only answers to the desperate situation into which the banks and the government have put the nation.
Stocks were basically flat, despite a pumping of $5.5 billion this morning by the Fed in yet another POMO. This amounts to nothing less than QE on the cheap, funding the banks with fresh cash every few days because they simply cannot roll enough notes to keep them going.
Dow 10,967.65, +22.93 (0.21%)
NASDAQ 2,380.66, -19.17 (0.80%)
S&P 500 1,159.97, -0.78 (0.07%)
NYSE Composite 7,448.33, +14.15 (0.19%)
The markets remain chaotic, bifurcated, as is the case today. Decliners took out advancers, 3157-2552. There were 454 new highs to 33 new lows. Volume remained at depressed levels.
NASDAQ Volume 2,127,381,000
NYSE Volume 4,205,435,500
Crude oil lifted 41 cents, to $83.23, but the real story was in the precious metals, which continued to rise in explosive fashion. The latest print for gold was $1348.50, up $7.90, while silver added 30 cents to $23.17. Precious metals prices are moving in direct inverse action to the crumbling currencies of the major industrialized nations, as the race to the bottom ramps up to include the US, all of Europe, Japan and other major nations.
More will be posted about developments in the mortgage foreclosure miasma, since today's news is more than enough upon which to chew for one day. The threat of another round of bank bailouts - which didn't work the first time around - is simply incomprehensible. The global economy will not sustain it.
That would be the failure of unwinding the toxic debt created by the nation's largest banks in the most magnificent swindle in the history of the world that not only allowed the banks and financial institutions to not only profit from their spendthrift, shifty, illegal ways, but to profit from it and then to prop it up when the house of cards began to crumble.
A report from the IMF released yesterday, calls for more quantitative easing by central banks and another round of bailouts for impaired, decrepit banks amounting to another $4 Trillion wasted on the very entities that started the entire mess, calling the banks the "Achilles Heel" of global recovery.
With apologies to the great Achilles, the banks aren't only the heel (though one could maintain that the bankers are "heels"), but the head, neck, shoulders, chest, torso, arms, legs, hands and feet of the financial crisis. They are all of it and they need to be forced to own up to their liabilities, stop the mockery of accounting known as mark to model and head directly into receivership or, more appropriately, to bankruptcy courts.
Not that it isn't where they're headed anyway, but this evil, crooked gang of thieves populating the banks and the halls of congress must not be allowed to rape and pillage the global economy one more day. If there's any time that the US public should be taking to the streets in protest, it is now, or, whenever they try to sneak the next bailout by us, for they truly cannot announce it very publicly or loudly.
There should be a minimum one year moratorium on all foreclosures, evictions and repossessions. Naturally, that will crush the real estate industry, but, at some point, there has to be a mechanism for price discovery. All the mortgages sold during the years 2003-2007 should be examined, documented and written down or forgiven, mostly to alleviate the strain on the courts and the public, but more realistically because the vast majority of these loans were originated under false pretenses or have been or are being foreclosed upon fraudulently, or both.
The banks and the note-holders will take significant hits to their bottom lines, but none could be more deserving. It's certainly a better solution than what's gone on for the past three years, a la foreclosure gone wild. Keeping people in homes, in communities, whether they're paying rent or mortgages or whether they have jobs or don't is the first step toward restoring the nation to some semblance of wholeness, though admittedly, it may already be too late, the pain and suffering inflicted on people and the economy are severely deep wounds which will not heal overnight.
We must, as a people and a nation, take positive steps toward recovery and that begins with thre truth finally being told about the banks, and the crimes they've committed. Most of the hot-shots running the major banks should already be behind bars, but we must start now before the statutes of limitations begin to expire.
No more bailouts, no more quantitative easing and maybe no more Federal Reserve. The time has come that desperate solutions are the only answers to the desperate situation into which the banks and the government have put the nation.
Stocks were basically flat, despite a pumping of $5.5 billion this morning by the Fed in yet another POMO. This amounts to nothing less than QE on the cheap, funding the banks with fresh cash every few days because they simply cannot roll enough notes to keep them going.
Dow 10,967.65, +22.93 (0.21%)
NASDAQ 2,380.66, -19.17 (0.80%)
S&P 500 1,159.97, -0.78 (0.07%)
NYSE Composite 7,448.33, +14.15 (0.19%)
The markets remain chaotic, bifurcated, as is the case today. Decliners took out advancers, 3157-2552. There were 454 new highs to 33 new lows. Volume remained at depressed levels.
NASDAQ Volume 2,127,381,000
NYSE Volume 4,205,435,500
Crude oil lifted 41 cents, to $83.23, but the real story was in the precious metals, which continued to rise in explosive fashion. The latest print for gold was $1348.50, up $7.90, while silver added 30 cents to $23.17. Precious metals prices are moving in direct inverse action to the crumbling currencies of the major industrialized nations, as the race to the bottom ramps up to include the US, all of Europe, Japan and other major nations.
More will be posted about developments in the mortgage foreclosure miasma, since today's news is more than enough upon which to chew for one day. The threat of another round of bank bailouts - which didn't work the first time around - is simply incomprehensible. The global economy will not sustain it.
Thursday, September 30, 2010
Should American Homeowners Stop Paying Mortgages?
Since Wall Street is essentially lined with Zombie traders trading Zombie stocks, there are more interesting developments on the financial landscape that deserve attention.
We'll get to the title of this post in a moment, but first, here's how the day went for those six or seven individual investors still trading stocks.
Initial claims came in better than expected, at 453,000, after last week's upwardly-revised 467,000. Everyone cheered. Stocks started the day on a positive note. At 9:45, the Chicago PMI came out, showing a dramatic ramp-up, to 60.4, after an August reading of 56.7, and far better than the expectation of 55.0. More cheering. CNBC's Mark Haines nearly wet himself, giddy that the Dow was closing in on 11,000, though that's expected from such an utter moron cheerleader.
The Fed executed another POMO, which was not accompanied by cheers, but rather jeers, worth only $2.2 billion. Stocks soured on the news. The Dow, which had been up more than 110 points, dropped to a 90-point loss shortly after noon, with the other indices registering similar declines.
The rest of the day was spent trying to ignore bad news and prop up stocks. The insiders did a fair job, bringing the indices back to show only marginal declines.
Dow 10,788.05, -47.23 (0.44%)
NASDAQ 2,368.62, -7.94 (0.33%)
S&P 500 1,141.20, -3.53 (0.31%)
NYSE Composite 7,281.07, -18.24 (0.25%)
NASDAQ Volume 2,198,369,250
NYSE Volume 4,673,228,500
Declining issues nosed out advancers, 2878-2812. New Highs beat New Lows, 478-36. Volume was at its normal, reduced pace.
Crude oil gained $2.11, to $79.97. Gold fell $1.20, to $1308.70. Silver also lost ground, down 15 cents, to $21.75.
Now, on to the question of whether or not American homeowners should stop paying their mortgages. This question became relevant a few years ago, when many subprime lenders defaulted on what have come to be known as liar loans, no doc loans and NINJA (No Income, No Job and no Assets) loans. The subprime catastrophe began in 2007, and some of the borrowers are probably still living in their homes without making either mortgage or tax payments.
Even more homeowners defaulted during the recession of 2008-2009, cratering the housing markets in Nevada, California, Florida and Michigan primarily, but spreading nationwide as foreclosures soared and millions were kicked out of their homes and onto the street.
Recently, however, the sad saga of the residential housing collapse took an even more severe turn, when it was discovered that thousands of affidavits used by banks in foreclosures were invalid. The signers of the affidavits were employees of Ally Bank, formerly GMAC, whohad neither read the contents of the affidavits nor had any knowledge of the events described therein.
Ally Bank responded by halting all foreclosures, evictions and repossessions in 23 states.
Also, implicated was JP Morgan Chase, one of the largest holders of mortgage paper. The bank responded by halting 56,000 foreclosures in their respective tracks. With an average value of $200,000 (probably worth something closer to $125,000 today), that's more than $11 billion in mortgage loans facing foreclosure that are just going to have to sit and wait while the bank and the courts sort all of this out.
In response, today, the Attorney General of Ohio, Richard Cordray, has referred the GMAC foreclosure fiasco to the Justice Department as a possible criminal matter.
And, not to be left out, late Wednesday, Ambac Assurance sued Bank of America for $16.7 billion, saying the bank's Countrywide unit fraudulently induced Ambac to insure bonds backed by improperly made loans.
On top of all of that, savvy homeowners with underwater loans have been strategically defaulting in droves, choosing to fight the banks rather than spend hard-earned money on a home which may never be worth what they paid for it. That only adds to the hundreds of thousands of strapped homeowners who defaulted due to job loss or other personal calamity.
With word out now that the bank paperwork may be in tatters, with titles clouded on homes across America, the banks - who started the whole mess by making mortgage loans to anybody with a pulse during the mid-2000s - are looking more and more like the eventual fall guys in all of this.
For background, this interview on King World with Institutional Risk Analytics Co-Founder Chris Whalen gives a very concise and scary view of where the banks stand and what may come next.
In essence, the banks have reams of paperwork on mortgages all over the country, though nobody is really certain which parts are real, which are forgeries and how this is all going to play out in the courts. What is known is that the banks face extremely expensive litigation for years to come, courts are overwhelmed with foreclosure cases and meanwhile, many non-paying homeowners are living in the houses rent-and-mortgage-free, most not paying property taxes either.
Banks may choose to "walk away" rather than litigate on many mortgage loans, especially those with known defects (so-called "putbacks") that have been returned by the GSEs (Fannie and Freddie) or the trusts of MBS.
With scads of homeowners living the good life, those stuck with mortgage payments may get the idea that they too might like to take their mortgage payment and sock it away or spend it rather than give it to the bank, who may or may not have legal title and thus the right to foreclose in the first place.
It's a calculated risk, depending upon the state in which you live and the pertinent laws. Most states are judicial foreclosure states, in which the only way for the bank to repossess is through the courts, while others are non-judicial. Even in those states, faulty paperwork would prevent foreclosure, should the homeowner hire a capable attorney or handle the proceedings on one's own.
With the outlook for the economy generally glum over the coming five to ten years, there are for certain more than a few people considering the strategic default route, foregoing the mortgage payment, and thus risking being kicked out of your home, and weighing the risk with the distinct possibility that the litigation could take anywhere from nine months to three years and that the bank may not have the proper paperwork, anyway.
In such a case, the homeowner may receive a windfall in the form of a free house, though he or she may not be able to ever sell it, due to defects in the title. The scenario is cloudy for most people, but still worth consideration.
One thing is for sure. The more people who openly default, the more the idea gains traction and at some point the flood of defaults could reach critical mass, wherein the banks and the courts are so completely overwhelmed - and the economy suffers severely as a result - that it makes complete sense NOT to pay.
That condition almost certainly already exists in Detroit, Las Vegas, Miami and parts of California and Arizona, the epicenters of mortgage default. The municipal authorities have to be under severe pressure in these cities, as property tax revenues have likely fallen to depression levels. When the government begins to take significant hits because of the calamity in home-ownership, squatting and vandalism become rampant. This is already the case in the aforementioned areas. The question is whether or not it is coming to your town or city and whether or not your local mayor or supervisor has enough vision - and money - to keep the municipality operational.
And that's the ultimate fear: anarchy, as debt becomes the brunt of jokes, homes are lived in without regard to legal ownership and the government cracks under fiscal pressure. If the onslaught of defaults isn't handled properly and quickly enough, America's cities could turn into seething, decaying cesspools of debt, default and doubt, with the suburbs soon to follow suit.
In such a scenario, guns and metal doors may serve occupants better than clear title and paying off a mortgage would move to the bottom of the list after safety, security, food, water and utilities.
So, the next time you're about to write that check for the monthly mortgage payment, consider that moral hazard has already been slain by the actions of the banks and the government and your next move could be the most critical, life-changing action you'll ever undertake.
Borrowing a line from Clint Eastwood's "Dirty Harry", you have to ask yourself, "do you feel lucky?"
We'll get to the title of this post in a moment, but first, here's how the day went for those six or seven individual investors still trading stocks.
Initial claims came in better than expected, at 453,000, after last week's upwardly-revised 467,000. Everyone cheered. Stocks started the day on a positive note. At 9:45, the Chicago PMI came out, showing a dramatic ramp-up, to 60.4, after an August reading of 56.7, and far better than the expectation of 55.0. More cheering. CNBC's Mark Haines nearly wet himself, giddy that the Dow was closing in on 11,000, though that's expected from such an utter moron cheerleader.
The Fed executed another POMO, which was not accompanied by cheers, but rather jeers, worth only $2.2 billion. Stocks soured on the news. The Dow, which had been up more than 110 points, dropped to a 90-point loss shortly after noon, with the other indices registering similar declines.
The rest of the day was spent trying to ignore bad news and prop up stocks. The insiders did a fair job, bringing the indices back to show only marginal declines.
Dow 10,788.05, -47.23 (0.44%)
NASDAQ 2,368.62, -7.94 (0.33%)
S&P 500 1,141.20, -3.53 (0.31%)
NYSE Composite 7,281.07, -18.24 (0.25%)
NASDAQ Volume 2,198,369,250
NYSE Volume 4,673,228,500
Declining issues nosed out advancers, 2878-2812. New Highs beat New Lows, 478-36. Volume was at its normal, reduced pace.
Crude oil gained $2.11, to $79.97. Gold fell $1.20, to $1308.70. Silver also lost ground, down 15 cents, to $21.75.
Now, on to the question of whether or not American homeowners should stop paying their mortgages. This question became relevant a few years ago, when many subprime lenders defaulted on what have come to be known as liar loans, no doc loans and NINJA (No Income, No Job and no Assets) loans. The subprime catastrophe began in 2007, and some of the borrowers are probably still living in their homes without making either mortgage or tax payments.
Even more homeowners defaulted during the recession of 2008-2009, cratering the housing markets in Nevada, California, Florida and Michigan primarily, but spreading nationwide as foreclosures soared and millions were kicked out of their homes and onto the street.
Recently, however, the sad saga of the residential housing collapse took an even more severe turn, when it was discovered that thousands of affidavits used by banks in foreclosures were invalid. The signers of the affidavits were employees of Ally Bank, formerly GMAC, whohad neither read the contents of the affidavits nor had any knowledge of the events described therein.
Ally Bank responded by halting all foreclosures, evictions and repossessions in 23 states.
Also, implicated was JP Morgan Chase, one of the largest holders of mortgage paper. The bank responded by halting 56,000 foreclosures in their respective tracks. With an average value of $200,000 (probably worth something closer to $125,000 today), that's more than $11 billion in mortgage loans facing foreclosure that are just going to have to sit and wait while the bank and the courts sort all of this out.
In response, today, the Attorney General of Ohio, Richard Cordray, has referred the GMAC foreclosure fiasco to the Justice Department as a possible criminal matter.
And, not to be left out, late Wednesday, Ambac Assurance sued Bank of America for $16.7 billion, saying the bank's Countrywide unit fraudulently induced Ambac to insure bonds backed by improperly made loans.
On top of all of that, savvy homeowners with underwater loans have been strategically defaulting in droves, choosing to fight the banks rather than spend hard-earned money on a home which may never be worth what they paid for it. That only adds to the hundreds of thousands of strapped homeowners who defaulted due to job loss or other personal calamity.
With word out now that the bank paperwork may be in tatters, with titles clouded on homes across America, the banks - who started the whole mess by making mortgage loans to anybody with a pulse during the mid-2000s - are looking more and more like the eventual fall guys in all of this.
For background, this interview on King World with Institutional Risk Analytics Co-Founder Chris Whalen gives a very concise and scary view of where the banks stand and what may come next.
In essence, the banks have reams of paperwork on mortgages all over the country, though nobody is really certain which parts are real, which are forgeries and how this is all going to play out in the courts. What is known is that the banks face extremely expensive litigation for years to come, courts are overwhelmed with foreclosure cases and meanwhile, many non-paying homeowners are living in the houses rent-and-mortgage-free, most not paying property taxes either.
Banks may choose to "walk away" rather than litigate on many mortgage loans, especially those with known defects (so-called "putbacks") that have been returned by the GSEs (Fannie and Freddie) or the trusts of MBS.
With scads of homeowners living the good life, those stuck with mortgage payments may get the idea that they too might like to take their mortgage payment and sock it away or spend it rather than give it to the bank, who may or may not have legal title and thus the right to foreclose in the first place.
It's a calculated risk, depending upon the state in which you live and the pertinent laws. Most states are judicial foreclosure states, in which the only way for the bank to repossess is through the courts, while others are non-judicial. Even in those states, faulty paperwork would prevent foreclosure, should the homeowner hire a capable attorney or handle the proceedings on one's own.
With the outlook for the economy generally glum over the coming five to ten years, there are for certain more than a few people considering the strategic default route, foregoing the mortgage payment, and thus risking being kicked out of your home, and weighing the risk with the distinct possibility that the litigation could take anywhere from nine months to three years and that the bank may not have the proper paperwork, anyway.
In such a case, the homeowner may receive a windfall in the form of a free house, though he or she may not be able to ever sell it, due to defects in the title. The scenario is cloudy for most people, but still worth consideration.
One thing is for sure. The more people who openly default, the more the idea gains traction and at some point the flood of defaults could reach critical mass, wherein the banks and the courts are so completely overwhelmed - and the economy suffers severely as a result - that it makes complete sense NOT to pay.
That condition almost certainly already exists in Detroit, Las Vegas, Miami and parts of California and Arizona, the epicenters of mortgage default. The municipal authorities have to be under severe pressure in these cities, as property tax revenues have likely fallen to depression levels. When the government begins to take significant hits because of the calamity in home-ownership, squatting and vandalism become rampant. This is already the case in the aforementioned areas. The question is whether or not it is coming to your town or city and whether or not your local mayor or supervisor has enough vision - and money - to keep the municipality operational.
And that's the ultimate fear: anarchy, as debt becomes the brunt of jokes, homes are lived in without regard to legal ownership and the government cracks under fiscal pressure. If the onslaught of defaults isn't handled properly and quickly enough, America's cities could turn into seething, decaying cesspools of debt, default and doubt, with the suburbs soon to follow suit.
In such a scenario, guns and metal doors may serve occupants better than clear title and paying off a mortgage would move to the bottom of the list after safety, security, food, water and utilities.
So, the next time you're about to write that check for the monthly mortgage payment, consider that moral hazard has already been slain by the actions of the banks and the government and your next move could be the most critical, life-changing action you'll ever undertake.
Borrowing a line from Clint Eastwood's "Dirty Harry", you have to ask yourself, "do you feel lucky?"
Tuesday, May 18, 2010
Churn, Churn, Churn: Stocks Turning to Mush
Possibly, you may have noticed a pattern developing over the past week or so.
That pattern has the unmistakable earmarks of a major downturn for equities, with all of the major indices falling below their 50-day moving averages, and, as of today, staying below them. Unlike yesterday's miraculous midday turnabout, the trading pattern on Tuesday was emblematic of typical bear market sell-offs, with stocks gaining in the morning, but, without conviction, being sold off soundly into the closing bell.
Rationale for the sustained selling might be one of many. Maybe it was the -0.1% April PPI reading (note to the uninitiated: negative PPI is usually a sound indicator of outright DEFLATION, the one word the Federal Reserve and central bankers worldwide dread). Possibly, some sellers were spooked by the dismally-low number of building permits issued nationwide: 606,000 in April, after 685,000 in March.
Neither of those seemed to weigh on markets at the opening, as both figures were released at 8:30 am, prior to the famous ringing of the bell. So, when Meredith Whitney, who has been elevated to stock goddess status after her correct calls on the 2008 financial collapse, took aim at both the Washington political crowd pondering financial regulation and the banking sector, a cadre of investors may have been taking notice.
Not only was her editorial in the Wall Street Journal a warning shot to current reform efforts and the debased credit climate, but it was after her appearance on CNBC (see below) that stocks really began to extend their slide. Whitney's advice was to avoid financial stocks "at all costs," which must have sounded an alarm, because all the major bank stocks took hits on Tuesday.
Bank of America (BAC) was off 2.45%; Goldman Sachs (GS) fell by more than 5 points, a 3.70% decline; Citigroup (C) finished the session at 3.73, its lowest close since March 8th, a decline of 3.37% on the day.
Dow 10,510.95, -114.88 (1.08%)
NASDAQ 2,317.26, -36.97 (1.57%)
S&P 500 1,120.80, -16.14 (1.42%)
NYSE Composite 6,959.21, -104.62 (1.48%
As expected, declining issues exceeded advancers by a wide margin, 4859-1705, though new highs managed to stay atop new lows for at least one more day, 166-100. Volume was on the low side, though it should pick up as the week progresses toward options expiration.
NYSE Volume 6,716,525,500.00
NASDAQ Volume 2,279,330,000.00
Crude oil, after being up nearly $2.00 in early trading, slipped to its first close below the $70 mark in 2010. Oil sold off another 67 cents, to $69.41. Keeping with the deflationary tone of the day, gold fell grandly, off $13.40, to $1,214.30. Silver managed to buck the trend, but only by throwing in 2 cents to its price per ounce, trading at $18.86.
The current conditions are ripe for a continuation of the current selloff or a radical race lower, a circumstance which could arise should the major averages fail on their tests of the 200-day moving averages. Dropping below those levels, which are not far off, could incite an all-out rout in equities as the economy still appears to be on shaky footing and companies may have trouble meeting last year's earnings results heading into the 2nd, 3rd and 4th quarters. While the upcoming spate of earnings reports in July may not be very challenging, the October and January 2011 results will be difficult, as the comparisons are to quarters in which companies had cut staff and expenses to raw bone and most cannot afford to operate in that manner for extended periods of time. The latter half of 2010 appears to be setting up as a very challenging period for the general economy and stocks overall.
That pattern has the unmistakable earmarks of a major downturn for equities, with all of the major indices falling below their 50-day moving averages, and, as of today, staying below them. Unlike yesterday's miraculous midday turnabout, the trading pattern on Tuesday was emblematic of typical bear market sell-offs, with stocks gaining in the morning, but, without conviction, being sold off soundly into the closing bell.
Rationale for the sustained selling might be one of many. Maybe it was the -0.1% April PPI reading (note to the uninitiated: negative PPI is usually a sound indicator of outright DEFLATION, the one word the Federal Reserve and central bankers worldwide dread). Possibly, some sellers were spooked by the dismally-low number of building permits issued nationwide: 606,000 in April, after 685,000 in March.
Neither of those seemed to weigh on markets at the opening, as both figures were released at 8:30 am, prior to the famous ringing of the bell. So, when Meredith Whitney, who has been elevated to stock goddess status after her correct calls on the 2008 financial collapse, took aim at both the Washington political crowd pondering financial regulation and the banking sector, a cadre of investors may have been taking notice.
Not only was her editorial in the Wall Street Journal a warning shot to current reform efforts and the debased credit climate, but it was after her appearance on CNBC (see below) that stocks really began to extend their slide. Whitney's advice was to avoid financial stocks "at all costs," which must have sounded an alarm, because all the major bank stocks took hits on Tuesday.
Bank of America (BAC) was off 2.45%; Goldman Sachs (GS) fell by more than 5 points, a 3.70% decline; Citigroup (C) finished the session at 3.73, its lowest close since March 8th, a decline of 3.37% on the day.
Dow 10,510.95, -114.88 (1.08%)
NASDAQ 2,317.26, -36.97 (1.57%)
S&P 500 1,120.80, -16.14 (1.42%)
NYSE Composite 6,959.21, -104.62 (1.48%
As expected, declining issues exceeded advancers by a wide margin, 4859-1705, though new highs managed to stay atop new lows for at least one more day, 166-100. Volume was on the low side, though it should pick up as the week progresses toward options expiration.
NYSE Volume 6,716,525,500.00
NASDAQ Volume 2,279,330,000.00
Crude oil, after being up nearly $2.00 in early trading, slipped to its first close below the $70 mark in 2010. Oil sold off another 67 cents, to $69.41. Keeping with the deflationary tone of the day, gold fell grandly, off $13.40, to $1,214.30. Silver managed to buck the trend, but only by throwing in 2 cents to its price per ounce, trading at $18.86.
The current conditions are ripe for a continuation of the current selloff or a radical race lower, a circumstance which could arise should the major averages fail on their tests of the 200-day moving averages. Dropping below those levels, which are not far off, could incite an all-out rout in equities as the economy still appears to be on shaky footing and companies may have trouble meeting last year's earnings results heading into the 2nd, 3rd and 4th quarters. While the upcoming spate of earnings reports in July may not be very challenging, the October and January 2011 results will be difficult, as the comparisons are to quarters in which companies had cut staff and expenses to raw bone and most cannot afford to operate in that manner for extended periods of time. The latter half of 2010 appears to be setting up as a very challenging period for the general economy and stocks overall.
Monday, May 10, 2010
Euro Bailout Revives Markets... and How!
If anyone was thinking the markets couldn't get any more extreme than they did last week, Monday morning's festival of funding, courtesy of the European Union and the IMF, to the tune of nearly $1 Trillion.
According the the Wall Street Journal:
Most of the gains came right at the open, which kept individual investors shut out for the most part. The major indices gapped up within 5 minutes of the open by roughly 4%.
Following Thursday's "magic moments," which witnessed a drop and subsequent rebound on the Dow in a matter of less than 15 minutes, market observers have plenty reason for skepticism. After Bob Brinker called the Thursday move, "manipulation," veteran trader Art Cashin, head of floor operations at UBS, said live on CNBC, referring to Friday's non-farm payroll report, "188,000 was a guess by the Bureau of Labor Statistics." Further, he said, "keep your eye on the referee. This game isn't on the up and up," referring to possibly the entire market.
All of this market volatility should come as no surprise to anybody who's been following the financial crisis over the past 2 1/2 - 3 years. Nations, and their political leaders, have a vested interest in keeping their worthless currencies in play, regardless the consequences down the road. Mountains of debt have been piled upon other mountains of debt around the world. The EU bailout was a long time in coming and a hard morsel to chew on for beleaguered leaders. Essentially, they had no choice, though the future seems as uncertain as ever, if not more so.
Stocks bounded higher in Europe and the US, with the average index gaining somewhere between 3 and 5 percent. Asian markets were more subdued, excepting Indonesia and India, which were both highr by 3 1/2 to 4%.
As usual, bank stocks - both in the US and in Europe - led the advance.
Dow 10,785.14, + 404.71 (3.90%)
NASDAQ 2,374.67, +109.03 (4.81%)
S&P 500 1,159.73, +48.85 (4.40%)
NYSE Composite 7,257.62, +341.44 (4.94%)
Advancing issues led decliners by an enormous margin, 6036-696. New highs regained their edge over new lows, though not my a meaningful margin, considering the momentous advance. There were 143 new highs to just 37 new lows. The idea that there were any new lows at all was remarkable, and also notable was the volume, at lower levels than on most of last week's down days.
NYSE Volume 7,876,002,500.00
NASDAQ Volume 2,858,059,750.00
Chances are good that throwing a trillion dollars at Europe's problems will stabilize markets for a while, but, like their TARP counterpart in the fall of 2008, the effects could be very short-lived. As with the TARP in the US, the average European citizen will not likely embrace the bailout of banks and government while the populace goes hungry.
Commodities were mixed on the news. Oil regained some of what it lost over the past week, gaining $1.69, to $76.80, but gold was down $9.60, to $1,200.40. Silver slit the difference, gaining 10 cents, to $18.53.
Largely ignored were two items: Ratings agency, Moody's, received a Wells Notice from the SEC, signaling that enforcement action was forthcoming; Fannie Mae posted a $13 billion loss for the first quarter and asked for another $8.4 billion in federal assistance.
One thing that seems certain: The comparisons of Wall Street to Las Vegas are unfair. Las Vegas is a much more friendly place for individuals. The odds stay the same and the rules don't change over the weekend. These comparisons are only giving Las Vegas - a place where anyone and everyone gets a fair shake - a bad name and should cease. We'd like to call Wall Street a den of wolves, but we actually like wolves.
According the the Wall Street Journal:
The U.S. market's surging open followed strong gains in the Asian and European markets after the European Union agreed to a EUR750 billion ($955 billion) bailout, including EUR440 billion of loans from euro-zone governments, EUR60 billion from a European Union emergency fund and EUR250 billion from the International Monetary Fund.
Most of the gains came right at the open, which kept individual investors shut out for the most part. The major indices gapped up within 5 minutes of the open by roughly 4%.
Following Thursday's "magic moments," which witnessed a drop and subsequent rebound on the Dow in a matter of less than 15 minutes, market observers have plenty reason for skepticism. After Bob Brinker called the Thursday move, "manipulation," veteran trader Art Cashin, head of floor operations at UBS, said live on CNBC, referring to Friday's non-farm payroll report, "188,000 was a guess by the Bureau of Labor Statistics." Further, he said, "keep your eye on the referee. This game isn't on the up and up," referring to possibly the entire market.
All of this market volatility should come as no surprise to anybody who's been following the financial crisis over the past 2 1/2 - 3 years. Nations, and their political leaders, have a vested interest in keeping their worthless currencies in play, regardless the consequences down the road. Mountains of debt have been piled upon other mountains of debt around the world. The EU bailout was a long time in coming and a hard morsel to chew on for beleaguered leaders. Essentially, they had no choice, though the future seems as uncertain as ever, if not more so.
Stocks bounded higher in Europe and the US, with the average index gaining somewhere between 3 and 5 percent. Asian markets were more subdued, excepting Indonesia and India, which were both highr by 3 1/2 to 4%.
As usual, bank stocks - both in the US and in Europe - led the advance.
Dow 10,785.14, + 404.71 (3.90%)
NASDAQ 2,374.67, +109.03 (4.81%)
S&P 500 1,159.73, +48.85 (4.40%)
NYSE Composite 7,257.62, +341.44 (4.94%)
Advancing issues led decliners by an enormous margin, 6036-696. New highs regained their edge over new lows, though not my a meaningful margin, considering the momentous advance. There were 143 new highs to just 37 new lows. The idea that there were any new lows at all was remarkable, and also notable was the volume, at lower levels than on most of last week's down days.
NYSE Volume 7,876,002,500.00
NASDAQ Volume 2,858,059,750.00
Chances are good that throwing a trillion dollars at Europe's problems will stabilize markets for a while, but, like their TARP counterpart in the fall of 2008, the effects could be very short-lived. As with the TARP in the US, the average European citizen will not likely embrace the bailout of banks and government while the populace goes hungry.
Commodities were mixed on the news. Oil regained some of what it lost over the past week, gaining $1.69, to $76.80, but gold was down $9.60, to $1,200.40. Silver slit the difference, gaining 10 cents, to $18.53.
Largely ignored were two items: Ratings agency, Moody's, received a Wells Notice from the SEC, signaling that enforcement action was forthcoming; Fannie Mae posted a $13 billion loss for the first quarter and asked for another $8.4 billion in federal assistance.
One thing that seems certain: The comparisons of Wall Street to Las Vegas are unfair. Las Vegas is a much more friendly place for individuals. The odds stay the same and the rules don't change over the weekend. These comparisons are only giving Las Vegas - a place where anyone and everyone gets a fair shake - a bad name and should cease. We'd like to call Wall Street a den of wolves, but we actually like wolves.
Thursday, January 21, 2010
Government Greases Skids for Wall Street Sell-Off
Onerous new regulations (Actually, they're only onerous if you're a rich banker. Otherwise, they're actually sensible) limiting the kinds of risks banks may take with federally-insured deposits gave the rich and powerful the perfect opportunity to take profits and blame any market and economic fallout on the Obama administration and congress.
The 213-point slide on the Dow was probably less related to banking than it was tied to initial unemployment claims, which rocketed to 482,000 for the most recent reporting period, from a previous reading of 446,000. Continuing claims held steady at 4,599,000 slackers still collecting unemployment insurance and keeping the fragile economy from falling off a cliff. While Wall Street may deride these individuals, the companies represented by stocks traded on the various exchanges have yet to even whisper about new hiring.
It's a scenario that many have predicted and is about to come true. Without new jobs for those millions of unemployed, underemployed and discouraged workers, major companies have squeezed themselves into a box without a box cutter. As earnings for the 4th quarter of 2009 roll out, investors will be seeking top-line (revenue) growth, but are likely to get more of the same cost-cutting, belt-tightening by which companies have produced profits for the past 9 months. The economy is just churning, not growing, and the natives are getting restless.
Today's losses in the major indices erased the gains thus far in 2010. Only the S&P 500 closed above where it ended 2009, but only by a point and change.
To get an idea of the kind of mood that is just beginning to pervade Wall Street, consider the knockout numbers reported by Google (GOOG), just after the close. The search giant beat revenue and profit estimates handily. The initial reaction was a 22-point sell-off just after these dazzling results were announced. This kind of behavior was easily predictable. With stocks at nose-bleed levels, earnings will not matter to holders of stock. They've already determined to sell, either just prior to or just after a company announces, so unless the numbers are simply out-of-this-world, expect all stocks to get roughly the same treatment.
Now that Wall Street has gotten over the giddiness of a new year, the hard, cold reality of an economy unmoved by stimulus and bailouts is knocking stocks for a loop.
Overnight, China released 4th quarter GDP numbers, showing a stunning annualized growth rate of 10.7%. Investors in America are concerned that China may begin reining in its own growth in order to stave off inflation, which is a major concern. While America and Europe wallow in the aftermath of the 2008 financial meltdown, the Chinese are eating their lunch, and they're not using chop-sticks.
Dow 10,389.88, -213.27 (2.01%)
NASDAQ 2,265.70, -25.55 (1.12%)
S&P 500 1,116.48, -21.56 (1.89%)
NYSE Composite 7,174.46, -155.37 (2.12%)
Losers beat winners, 5027-1539, and new highs outnumbered new lows, 284-55. Volume was off-the-charts to the high side, an indication that the rout has just begun. Selling should continue nearly unabated through the next 3-5 weeks, unless economic data indicates the economy is growing well beyond tepid expectations. It's not, so don't get your hopes up. Bears are becoming more emboldened every day.
NYSE Volume 7,747,543,000
NASDAQ Volume 2,819,241,250
Losses were not limited to stocks. Commodities also took widespread hits as another wave of deflation distress wafts through the markets. Oil dropped $1.66, to $76.08. Gold lost $9.60, to $1,103.00. Silver followed it down, losing 29 cents, to $17.60.
Lately, I've taken to offer up alternatives to the usual Wall Street fare, the ups and downs of daily life in the dithering world of stocks, but today just seemed to legitimize my thinking, that stocks are not for everyone, especially those without the cushion necessary to take sustained losses and ride out long positions. The market was overbought and due for a turn-back, so I'm not taking any credit for soothsaying. It was pretty easy to see.
Cash in your pocket today was the big winner. Just like it was yesterday and probably will be in coming days, weeks and months because the economic drop dead party is just getting going. The system, built on bad loans and bailouts, is barely sustainable under current conditions.
Relax. Have a drink. Have a smoke. America is still a pretty good country.
The 213-point slide on the Dow was probably less related to banking than it was tied to initial unemployment claims, which rocketed to 482,000 for the most recent reporting period, from a previous reading of 446,000. Continuing claims held steady at 4,599,000 slackers still collecting unemployment insurance and keeping the fragile economy from falling off a cliff. While Wall Street may deride these individuals, the companies represented by stocks traded on the various exchanges have yet to even whisper about new hiring.
It's a scenario that many have predicted and is about to come true. Without new jobs for those millions of unemployed, underemployed and discouraged workers, major companies have squeezed themselves into a box without a box cutter. As earnings for the 4th quarter of 2009 roll out, investors will be seeking top-line (revenue) growth, but are likely to get more of the same cost-cutting, belt-tightening by which companies have produced profits for the past 9 months. The economy is just churning, not growing, and the natives are getting restless.
Today's losses in the major indices erased the gains thus far in 2010. Only the S&P 500 closed above where it ended 2009, but only by a point and change.
To get an idea of the kind of mood that is just beginning to pervade Wall Street, consider the knockout numbers reported by Google (GOOG), just after the close. The search giant beat revenue and profit estimates handily. The initial reaction was a 22-point sell-off just after these dazzling results were announced. This kind of behavior was easily predictable. With stocks at nose-bleed levels, earnings will not matter to holders of stock. They've already determined to sell, either just prior to or just after a company announces, so unless the numbers are simply out-of-this-world, expect all stocks to get roughly the same treatment.
Now that Wall Street has gotten over the giddiness of a new year, the hard, cold reality of an economy unmoved by stimulus and bailouts is knocking stocks for a loop.
Overnight, China released 4th quarter GDP numbers, showing a stunning annualized growth rate of 10.7%. Investors in America are concerned that China may begin reining in its own growth in order to stave off inflation, which is a major concern. While America and Europe wallow in the aftermath of the 2008 financial meltdown, the Chinese are eating their lunch, and they're not using chop-sticks.
Dow 10,389.88, -213.27 (2.01%)
NASDAQ 2,265.70, -25.55 (1.12%)
S&P 500 1,116.48, -21.56 (1.89%)
NYSE Composite 7,174.46, -155.37 (2.12%)
Losers beat winners, 5027-1539, and new highs outnumbered new lows, 284-55. Volume was off-the-charts to the high side, an indication that the rout has just begun. Selling should continue nearly unabated through the next 3-5 weeks, unless economic data indicates the economy is growing well beyond tepid expectations. It's not, so don't get your hopes up. Bears are becoming more emboldened every day.
NYSE Volume 7,747,543,000
NASDAQ Volume 2,819,241,250
Losses were not limited to stocks. Commodities also took widespread hits as another wave of deflation distress wafts through the markets. Oil dropped $1.66, to $76.08. Gold lost $9.60, to $1,103.00. Silver followed it down, losing 29 cents, to $17.60.
Lately, I've taken to offer up alternatives to the usual Wall Street fare, the ups and downs of daily life in the dithering world of stocks, but today just seemed to legitimize my thinking, that stocks are not for everyone, especially those without the cushion necessary to take sustained losses and ride out long positions. The market was overbought and due for a turn-back, so I'm not taking any credit for soothsaying. It was pretty easy to see.
Cash in your pocket today was the big winner. Just like it was yesterday and probably will be in coming days, weeks and months because the economic drop dead party is just getting going. The system, built on bad loans and bailouts, is barely sustainable under current conditions.
Relax. Have a drink. Have a smoke. America is still a pretty good country.
On CNBC, Robert Weissman Proposes that "Under Water" Mortgages Stop Paying!
Stemming originally from loose lending standards that sent property values soaring from 2000-2007, a strategic default strategy for people with "under water" mortgages - the mortgage is for more than the fair market value of the home - is beginning to go mainstream.
Exacerbated by the $700 billion TARP bailout of the major banks which caused most of the problems in the first place, and now, executive bonuses to the same banks' top people, more and more Americans are seeking relief by just "walking away" or simply not paying their mortgages.
Here, in this video clip aired around 10:00 am EST on CNBC, Robert Weissman, President of the consumer advocacy group, Public Citizen, advocates that people who are "upside down" or "under water" should stop paying their mortgages. The comment comes at about the 4 minute mark in this discussion of executive bonuses, but despite the shock and awe - especially by Wall Street shill Mark Haines - Weissman doesn't retract or relent.
Pretty amazing.
Exacerbated by the $700 billion TARP bailout of the major banks which caused most of the problems in the first place, and now, executive bonuses to the same banks' top people, more and more Americans are seeking relief by just "walking away" or simply not paying their mortgages.
Here, in this video clip aired around 10:00 am EST on CNBC, Robert Weissman, President of the consumer advocacy group, Public Citizen, advocates that people who are "upside down" or "under water" should stop paying their mortgages. The comment comes at about the 4 minute mark in this discussion of executive bonuses, but despite the shock and awe - especially by Wall Street shill Mark Haines - Weissman doesn't retract or relent.
Pretty amazing.
As unbelievable as not paying your mortgage may sound, it gets even more interesting. Having researched this topic extensively, it appears that the banks which made all of the sub-prime, 20/80, interest-only, balloon payment, ARM, and prime loans - especially between 2003 and 2007 - were the same ones which, a. sliced and diced and "securitized" the notes, and, b. received TARP bailout funds.
While those two magnificent events are separate, they are conjoined. Because the banks went about the unthinkable business of separating the mortgage from the note (the common practice for hundreds of years had been for the bank to hold both the mortgage and the promissory note (promise to repay)), and then packaging these notes for sale to private investors, when the first big wave of defaults hit in 2007 and accelerated in 2008, the banks were caught with significant egg on their collective faces, as the SDOs (Securitzed Debt Obligations) began to default, eventually prompting the bailout, now better known as TARP, the $700 billion swindle which kept the banks solvent - for now.
However, because the mortgage and note on many mortgages (some sources say as many as 60 million of them) were separated, when homeowners stop paying, the normal route for the bank is to foreclose, except that the mortgage holder, or loan servicer, has no standing in a foreclosure, only the note-holder does. Those notes have been sold, traded, lost or are otherwise missing in action, the actual holder of the note unknown or is some obscure trust set up to sell interest in the note to investors in exchange for regular payments.
The financial and legal boondoggle this situation has created generally leaves homeowners with some good options: if the servicer brings a foreclosure action, they are in violation of federal and in most locales, state law, and, widely interpreted, also have no standing to foreclose. The mortgagor (homeowner) can then choose between filing a motion for dismissal on grounds that the servicing bank has no standing, or demand that the bank produce the note. In either instance, the foreclosure process is delayed and/or halted, sometimes permanently.
Recent decisions have ruled in favor of homeowners and against the banks. The media generally doesn't want this idea to gain traction, and the general public doesn't understand the issues, especially the key one that if the note and note-holder cannot be determined, or if the note-holder doesn't initiate foreclosure, the homeowner may be sitting on property, free and clear, even though title to the property will be clouded, at best.
It's difficult to believe that the banks who devised the entire scheme of mortgage fraud and securitzation didn't know exactly what they were doing. Once property values fall so dramatically that mortgagors stop paying en masse, the game is over. Bank income will fall so dramatically they'll be forced to close their doors. The government will have to step in again, though this time, not with money, but with guns and tanks to protect the banks' remaining assets (buildings and property), employees, and especially, executives.
The calamitous situation that would occur - clogging the judicial system (which is largely broken anyway) with far too many cases than it can handle - with homeowner, landowner, title and lien disputes rampant, no reliable banking system, and virtually no laws governing property ownership, conditions would deteriorate quickly. Municipalities, whose entire existence depends on property tax revenues, would be in line to fail, as would, naturally, the usurious issuers of credit cards, which debt is unsecured.
In such a scenario, the financial system would completely break down, along with the judiciary. Law enforcement would be overwhelmed, the likely outcome being the imposition of martial law in the hardest-hit areas, probably most of California, Florida, Nevada, Arizona and most major cities. Naturally, the stock market would implode, as bloated as it already is.
If you think the financial meltdown of 2008 was close to the edge, imagine just 10 million mortgages going unpaid and the resultant calamity. The bright side may be that you get to own your home free and clear, the downside being that you may have to arm yourself to defend it, and, in the end, you probably couldn't transfer clean title, so you couldn't sell it or take out a home equity mortgage against it.
The choice is there. Personally, I have no respect for anyone who knowingly purchased a home at inflated prices over the past 5 or 6 years and now wants to screw the bank because property values have fallen. Stop paying, and they'll fall some more. At least most people will have a place to live.
America is now sailing in uncharted waters. The chance of the system breaking down to a point of widespread civil unrest is probably greater now than it has ever been, even moreso than during the financial breakdown. Middle and lower class Americans have watched banks being bailed out (with taxpayer money), bankers hauling down huge bonuses and Wall Street partying like it's New Year's Eve, while most of their neighbors are losing their jobs, their homes, their families and their self-respect. The unfairness of the nation's financial condition (to say nothing of the welfare state) has reached a boiling point at which more than just a few people are considering the option of strategic default, hoarding cash and letting the chips fall where they may.
We certainly do live in interesting times.
(I'll be editing this later to include some links)
Friday, January 15, 2010
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.
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.
Monday, July 13, 2009
Financials Fun or Another Sucker Rally?
With 2nd quarter earnings about to begin rolling out tomorrow, Monday's movement in the markets was something to ponder befor possibly jumping into the breach. Leading the way were financials, the very same banks that caused huge financial failures less than a year ago.
Are the banks fully rejuvenated? Can they be trusted as guardians of important capital - for mortgages, college, retirement, etc. - or have investors forgotten so soon how cavalier these same bankers were with other people's money. Sadly, I am of the camp that says they cannot be trusted. Every time financial stocks lead rallies, I see the same fraudulent faces, the same lying CEOs, none of whom have been rightfully indicted, prosecuted and jailed for their various crimes: collusion, delusion, evasion and deceit.
After falling for four straight weeks, maybe the market was prime for gains, but one must bear in mind where we are in the greater cycle. Stocks are just coming off highs, and, with the economy still struggling, one has to question the wisdom of jumping in at this particular juncture. Maybe for short term profits, this is the right move, but longer term, stocks could easily become cheaper in months ahead. If this is a short term timing rally and an in-and-out play, which is predominantly what our markets have become, this may be worthwhile, but waiting until the first few days' worth of earnings results come to the fore seems to be a more prudent position.
In any case, stocks were brought higher by the banks, which lifted every sector by at least 1%.
Dow 8,331.68, +185.16 (2.27%)
NASDAQ 1,793.21, +37.18 (2.12%)
S&P 500 901.05, +21.92 (2.49%)
NYSE Composite 5,761.37, +133.85 (2.38%)
The movement was broad based, with advancing issues beating out decliners, 4980-1400. New lows, however, maintained their edge over new highs, 79-40. Volume was nothing about which to get excited, another indication that not all hands are on board with this move. Weak volume has been an consistent feature marking the end of the rally and the beginning of the correction four weeks ago.
NYSE Volume 1,189,460,000
NASDAQ Volume 1,921,335,000
Commodities were all over the map. Those in the energy-related sector followed oil's downward draft of 20 cents, closing at $59.69. The metals were all up, with gold higher by $10.00, to $922.50, and silver up 14 cents, to $12.79. Livestock and foodstuffs finished in mixed fashion.
Banks will be in focus the rest of this week as a number of big names announce earnings. Goldman Sachs, a particularly important bellwether, reports tomorrow.
Are the banks fully rejuvenated? Can they be trusted as guardians of important capital - for mortgages, college, retirement, etc. - or have investors forgotten so soon how cavalier these same bankers were with other people's money. Sadly, I am of the camp that says they cannot be trusted. Every time financial stocks lead rallies, I see the same fraudulent faces, the same lying CEOs, none of whom have been rightfully indicted, prosecuted and jailed for their various crimes: collusion, delusion, evasion and deceit.
After falling for four straight weeks, maybe the market was prime for gains, but one must bear in mind where we are in the greater cycle. Stocks are just coming off highs, and, with the economy still struggling, one has to question the wisdom of jumping in at this particular juncture. Maybe for short term profits, this is the right move, but longer term, stocks could easily become cheaper in months ahead. If this is a short term timing rally and an in-and-out play, which is predominantly what our markets have become, this may be worthwhile, but waiting until the first few days' worth of earnings results come to the fore seems to be a more prudent position.
In any case, stocks were brought higher by the banks, which lifted every sector by at least 1%.
Dow 8,331.68, +185.16 (2.27%)
NASDAQ 1,793.21, +37.18 (2.12%)
S&P 500 901.05, +21.92 (2.49%)
NYSE Composite 5,761.37, +133.85 (2.38%)
The movement was broad based, with advancing issues beating out decliners, 4980-1400. New lows, however, maintained their edge over new highs, 79-40. Volume was nothing about which to get excited, another indication that not all hands are on board with this move. Weak volume has been an consistent feature marking the end of the rally and the beginning of the correction four weeks ago.
NYSE Volume 1,189,460,000
NASDAQ Volume 1,921,335,000
Commodities were all over the map. Those in the energy-related sector followed oil's downward draft of 20 cents, closing at $59.69. The metals were all up, with gold higher by $10.00, to $922.50, and silver up 14 cents, to $12.79. Livestock and foodstuffs finished in mixed fashion.
Banks will be in focus the rest of this week as a number of big names announce earnings. Goldman Sachs, a particularly important bellwether, reports tomorrow.
Friday, June 5, 2009
Jobs Data Improving, But Stocks Fail to Gain
At the release of May's non-farm payroll data from the Labor Department, stock futures rose dramatically, as the government said 345,000 job losses occurred in May. Most analysts were looking for a loss of about 520,000, so the improvement was substantial and the futures trade spilled over into the open, with stocks sharply higher in the opening minutes.
Just about 10 minutes into the session, though, something odd happened. Stocks lost their momentum and before 10:00 am, all of the indices were trading in the red. For the remainder of the session, the various indices either stayed marginally positive (the Dow), hugged the flat line (NASDAQ and S&P) or remained in the red (NYSE Comp.).
By 2:00 pm, the bloom was off the rose, and the expected rally on "real" good economic news, instead of the media-spun variety, never materialized. Stocks generally slumped when they should have been soaring.
The mainstream and financial media will attempt to put some kind of cover story on how the numbers were "already discounted" or some other rubbish, but let's allow for some degree of inside baseball (manipulation) as the true explanation. If one examines the timeline between the March 9 bottom and today, it's fairly evident what has occurred. The banks, through their brokerage arms, which received government money through TARP and other lending facilities - B of A, Citi, Goldman, JP Morgan, et. al. - pumped the markets back to life, and, not satisfied with a reasonable rebound of 15-20%, extended gains to the 35-39% range, all of this based on media innuendo, fudged accounting and hopes pinned on stress test results.
Now, when there is actual positive news on unemployment, the banksters find themselves in a topped out position. Further gains would seem frothy, despite the good news, so they are nakedly doing what every chiseling, cheating, Ponzi player would: they are dumping stocks at inflated prices back to the rabble. The whole process has been very untidy and wholly opaque. Fewer words of truth have ever been spoken around Wall Street than during the past three months. Big money is bailing, taking profits and heading to the sidelines and the Hamptons while the rest of the market hammers out the details over the summer.
Investors had best pay close attention next week and especially the trading week of June 15-19, when June options expire. There are likely large put positions already staked out by the large money players. The markets remain remarkably overbought and poised for a move in one direction or the other. With 2nd quarter earnings season still more than a month off, the chances are good that some external event will precipitate a trundle to the downside.
Dow 8,763.13, +12.89 (0.15%)
NASDAQ 1,849.42, -0.60 (0.03%)
S&P 500 940.09, -2.37 (0.25%)
NYSE Composite 6,082.64, -28.12 (0.46%)
In deference to the flat headline numbers, declining issues far outpaced advancers, 3408-2908. New lows vs. new highs remains at a crossroads, with the new highs a narrow winner, 91-87. Volume was pathetic, so, once again, it's influence as an indicator is marginal.
NYSE Volume 1,261,973,000
NASDAQ Volume 2,333,721,000
Commodities spent the majority of the day in the red. Oil backed off 37 cents, to $68.44, though gold saw a much larger decline, down $19.70, to $962.60, backing far away from the magic $1000 level. Silver tracked along the same path, losing 51 cents, to $15.39 the ounce. Its difficult to get a handle on commodity trading with so much speculation going on, but there are small indications that the general deflationary environment is keeping a lid on prices, for now. How that plays out a year or two down the road is also very uncertain.
Stocks still showed another positive week, despite the sleepy results of Friday. Next week may very well show more liquidation in equity positions and consolidation, otherwise known as profit-taking. It bears watching,
Just about 10 minutes into the session, though, something odd happened. Stocks lost their momentum and before 10:00 am, all of the indices were trading in the red. For the remainder of the session, the various indices either stayed marginally positive (the Dow), hugged the flat line (NASDAQ and S&P) or remained in the red (NYSE Comp.).
By 2:00 pm, the bloom was off the rose, and the expected rally on "real" good economic news, instead of the media-spun variety, never materialized. Stocks generally slumped when they should have been soaring.
The mainstream and financial media will attempt to put some kind of cover story on how the numbers were "already discounted" or some other rubbish, but let's allow for some degree of inside baseball (manipulation) as the true explanation. If one examines the timeline between the March 9 bottom and today, it's fairly evident what has occurred. The banks, through their brokerage arms, which received government money through TARP and other lending facilities - B of A, Citi, Goldman, JP Morgan, et. al. - pumped the markets back to life, and, not satisfied with a reasonable rebound of 15-20%, extended gains to the 35-39% range, all of this based on media innuendo, fudged accounting and hopes pinned on stress test results.
Now, when there is actual positive news on unemployment, the banksters find themselves in a topped out position. Further gains would seem frothy, despite the good news, so they are nakedly doing what every chiseling, cheating, Ponzi player would: they are dumping stocks at inflated prices back to the rabble. The whole process has been very untidy and wholly opaque. Fewer words of truth have ever been spoken around Wall Street than during the past three months. Big money is bailing, taking profits and heading to the sidelines and the Hamptons while the rest of the market hammers out the details over the summer.
Investors had best pay close attention next week and especially the trading week of June 15-19, when June options expire. There are likely large put positions already staked out by the large money players. The markets remain remarkably overbought and poised for a move in one direction or the other. With 2nd quarter earnings season still more than a month off, the chances are good that some external event will precipitate a trundle to the downside.
Dow 8,763.13, +12.89 (0.15%)
NASDAQ 1,849.42, -0.60 (0.03%)
S&P 500 940.09, -2.37 (0.25%)
NYSE Composite 6,082.64, -28.12 (0.46%)
In deference to the flat headline numbers, declining issues far outpaced advancers, 3408-2908. New lows vs. new highs remains at a crossroads, with the new highs a narrow winner, 91-87. Volume was pathetic, so, once again, it's influence as an indicator is marginal.
NYSE Volume 1,261,973,000
NASDAQ Volume 2,333,721,000
Commodities spent the majority of the day in the red. Oil backed off 37 cents, to $68.44, though gold saw a much larger decline, down $19.70, to $962.60, backing far away from the magic $1000 level. Silver tracked along the same path, losing 51 cents, to $15.39 the ounce. Its difficult to get a handle on commodity trading with so much speculation going on, but there are small indications that the general deflationary environment is keeping a lid on prices, for now. How that plays out a year or two down the road is also very uncertain.
Stocks still showed another positive week, despite the sleepy results of Friday. Next week may very well show more liquidation in equity positions and consolidation, otherwise known as profit-taking. It bears watching,
Thursday, May 7, 2009
Ponzi Would Be Proud On Stress Test Results
First, let's not confuse Charles Ponzi (that's him on the left) with Arthur Herbert Fonzarelli (otherwise known as actor Henry Winkler in the role of "Fonzie" or "the Fonz" on 70s hit TV show "Happy Days" - shown at right). Sure, the names sound familiar, but that's where such familiarity ends.Charles Ponzi was a swindler extraordinaire, who paid investors outlandish profits by continually bringing in fresh capital from other investors (or "suckers" as the case may be). Ponzi never actually invested any money in anything; he simply churned what seemed to be - at the time - a never-ending supply of money from pigeons to keep the appearance of a grand investment going. Thus, the term "Ponzi scheme" became popularized for this kind of endeavor, also known as a pyramid or airplane scheme.
Alfred Fonzarelli was a fictional character who exuded the hip and cool of a 50's greaser. His trademark leather jacket and slicked-back hair were elements of his persona. But Fonzie was honest, though arguably crude. Ponzi, a real person, was a cheat, and a great one. Some believe Bernie Madoff is the present-day embodiment of Charles Ponzi.
Now that we have the introductions out of the way, let's get to the core issue: that of the government's bank stress tests, which results are finally going to be released to the public, today, at 5:00 pm EDT. After months of nail-biting anticipation, it appears that 10 or 11 of the nation's largest 19 financial institutions are actually not in very good health. Here is a nice capsule of the results. Here is a NY Times article offering some rather scathing reviews on the entire stress test process from some very well-respected economic heavyweights.
Finally, here is a story and video from Yahoo! Tech Ticker which explains how Bank of America needs $34 billion of additional capital, and how they plan to get that by converting the TARP funds ostensibly "loaned" from the government (taxpayers) from preferred stock into common stock, resulting in a surplus of $11 billion with which they can then begin paying back the TARP funds. Yes, you read that right, BofA will use TARP funds to pay back TARP funds.
Only in America can bankers and politicians steal in such plain view from taxpayers. Certainly Charles Ponzi would be proud. Fonzie, for his part, might say, "Heeey, that's no way to treat people." Naturally, the truth-loving Fonzie is right. The US taxpayers are being taken to the cleaners on this one.
Maybe there's a silver lining in all of this hanky panky. Stocks were pounded down pretty well for most of today's session, on relatively strong volume. Could it be that some of the fund managers and top investors are seeing this for what it is - outright fraud - and calling an end to Wall Street's wild rally? Could be, but, considering the length and size of said recent rally, it's going to take more than a day or two of declines to straighten out the newest mess, that of stocks being wildly overvalued again.
As I've been saying all along (and I have plenty of company in my opinions, too), the banks aer not in good health. The stress tests were just a smoke screen, the PPIP is a bad joke at best, almost none of the various illiquid assets held by these banks have been disposed of, rather, they have been revalued using mark-to-model rather then the more accurate (and honest) mark-to-mark accounting, the Fed is now monetizing the national debt in addition to taking on all sorts of toxic waste, and, to top it all off, Thursday's Treasury auction of 30-year notes was a resounding failure, poorly received, with 30-year bond yields hitting 4.309%.
It's a mess of even more gigantic proportions that before the government began its meddling nearly eight months ago. Now, stocks will have to compete with higher bond yields, as will mortgage rates, which the government hoped to keep low, while the banks try to raise a cumulative $65 billion from private sources, in direct competition with the enormous Treasury sales to finance the burgeoning US debt, which will cost more and more to service if yields continue to climb.
So, a good number of investors took today's sloppy news flow and decided it was time to take some of their quick profits off the table. Not such a bad idea, despite the growing consensus that the economy is on the upswing (maybe, but probably not) with the Labor Dept. due to release nonfarm payroll data for April on Friday - tomorrow.
While the estimate is for job losses to total only 490-590,000, certainly less than March's 663,000, it's hardly cause for celebration, in light of the fact that the US economy needs to create 150,000 jobs per month just to keep pace with population increases and new entrants into the labor force. The calculations of the Labor Dept. also do not account for the 54,000 Chrysler employees being furloughed for 30 to 60 days, nor the 200,000 GM employees who will be idled for as many as 9 weeks this summer. Nor does the government count workers who have exhausted their unemployment insurance, those who are working part time instead of full time in their estimate of the unemployment rate of 8.9%. Others, including economists at the University of Maryland, put the figure at closer to 17%.
Add to the malaise that LA Dodger Manny Ramirez has been suspended by MLB for 50 games for violating their banned substance policy. He will not be paid roughly a third of his $25 million salary. So there's another $8.5 million not being spent into the economy right there! Yikes!
So, maybe today was a good time to get out of stocks. After all the major indices have risen by more than 30% over the past 8-9 weeks.
Dow 8,409.85, -102.43 (1.20%)
NASDAQ 1,716.24, -42.86 (2.44%)
S&P 500 907.39, -12.14 (1.32%)
NYSE Composite 5,800.15, -90.40 (1.53%)
Declining issues took the advantage over advancers, 4255-2281; new lows surpassed new highs once more, 95-52, and volume was stupendous, higher even than yesterday's. There certainly is no lack of trading going on as the economic wheels turn, or, grind, whichever case you prefer.
NYSE Volume 1,969,476,000
NASDAQ Volume 3,274,508,000
Commodities were bounced around by conflicting data, but oil managed a gain of 37 cents, to $56.39. Gold rose another $4.50, to $915.50, continuing the recent trend of gains, as did silver, which crossed the $13.80 threshold - the price at which melt value of US coins equals 10X their face value - with a rush, gaining 32 cents, to $14.03.
Most of the news flow for the week complete, investors will have until tomorrow morning's opening bell to weigh all the factors, including the nonfarm payroll figures, due out at 8:30 am. It's anyone's guess which way they'll turn, but one thing's for sure: the economy is not in as rosy shape as the news and pundits would have us believe. The recent bout of "green shoots" and "semi-positive" readings were more of the nature of falling at a less-pronounced pace than earlier this year or last fall. The US economy is still weakening, though not quite as quickly as before.
It's like saying a man clawed and chewed a lion only losing one arm and one leg is good news. He's still alive and he's got one of each type of limb left. Really, how many people would call that "good" news? Seriously, folks, it's not a matter of perception. The reality is not that the glass is half full or half empty, it's that the glass has a hole in the bottom.
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