Having spent the majority of my day researching the establishment of local currencies (a little progress, and more to be reported at a later date), this daily dose of economic news and views is going to be brief.
Stocks were generally higher on the first day of February. It could have had something to do with economic data, though that was generally mixed. Construction spending in December was down 1.2%, worse than the 0.5% decline that had been forecast.
January's ISM Manufacturing Index hit a five-year high at 58.4, much better than the consensus call of 55.5. That was the most positive news the market has seen in months, and that seemed to be where investors were mainly focused. Additionally, personal income rose 0.4% in December, though spending for the month increased just 0.2%, implying that consumers were saving during the holidays, rather than spending, as our great inflationist Fed would have us do.
In any case, all of that added up to considerable glee on Wall Street, erasing some of the losses incurred over the past two weeks. All 10 industry sectors sported positives, with basic materials leading the charge. Gold and silver soared in value, which can be viewed either as a consequence or a cause of the rally. The metals had been trending lower for weeks.
Dow 10,185.53, +118.20 (1.17%)
Nasdaq 2,171.20, +23.85 (1.11%)
S&P 500 1,089.18, +15.31 (1.43%)
NYSE Composite 7,008.23, +124.45 (1.81%)
Advancing issues clobbered decliners, 4719-1826, though there were just 114 new highs and 61 new lows. The narrow margin continues to suggest that the market is still weak and in danger of rolling over. Volume was tepid, at best, even though there was obviously more interest in buying than selling.
One caveat to this entire scenario must be exposed: the rally which began in earnest in March 2009, may have been more a trader's push than any real investment-making by the general public. Even though the market serves as a discounting mechanism and the accepted logic is that the market is 6 months ahead of the economy, the current condition is just not bearing fruit. If we rallied sharply from March through June, and then again from late July through December, the initial signs of recovery should not be as well-disguised as they are. That may be begging the question, but how long is the American public supposed to wait before seeing real growth, not the inflation-inspired, deficit-spending, government-stimulated variety which is now evident?
NYSE Volume 4,823,760,500
Nasdaq Volume 2,234,145,750
As mentioned above, the metals were higher. Gold spiked $21.00, to $1,105.30. Silver was up 46 cents, to $16.65. The bad news was that oil followed, gaining over $2.00, to $74.93. Ouch!
Showing posts with label currency. Show all posts
Showing posts with label currency. Show all posts
Monday, February 1, 2010
Wednesday, January 27, 2010
How To Create Your Own Currency
I promised to divulge information on creating your own currency a couple of days ago, and am now prepared to take a shot at it.
First, however, a quick look at today's financial market action.
Stocks were bounding around in negative territory for most of the session, until the FOMC rate policy decision came out at 2:00 pm. As this was the least hyped Fed meeting in many months, little was expected to change in either the rates or the language. The economy is clearly slip-sliding along, and fears that the recovery is more myth than meat have recently come to the surface.
Nevertheless, stocks staged a little bit of a rally, mostly on news that the Fed would continue doling out scads of free money, at nearly a zero interest rate. Banks which have rights to the discount window are making out like bandits, as they can now pick and choose with whom they desire to do business, which means that Mr. Average Joe with a sound business idea is more likely to get laughed out of the bank rather than be treated with respect. Either that, or the bank will offer him a loan at some ungodly, usurious rate of 25% interest, or more.
The major banks which feed at the trough of the Federal Reserve are lending plenty to people who are buying real estate at distressed levels and/or have businesses the banks want to be a part of. Lending is going primarily to huge corporations in a final push for the perceived goal of Nazi-style fascism, in which the government and big business are in cahoots and the middle and lower classes foot the bill and struggle for existence.
That's good for Wall Street, as today's numbers reinforce the argument that bigger is better and may be all that matters.
Dow 10,236.16, +41.87 (0.41%)
NASDAQ 2,221.41, +17.68 (0.80%)
S&P 500 1,097.50, +5.33 (0.49%)
NYSE Composite 7,035.61, +7.29 (0.10%)
Advancing issued edged decliners, 3391-3082. New highs were 128, to 87 new lows, the closest gap between the two since June, 2009. The market is about to turn over completely in a new downturn which could be severe. Stocks are already off 4-6% from their highs and another 5% drop could easily occur within the next month. Volume was good, though shaky.
NYSE Volume 6,175,805,500
NASDAQ Volume 2,492,886,750
Oil gained 33 cents, to $74.00, a ridiculous number considering not only supply and demand issues, but general trends in the global economy. Expect to see oil under $70/barrel soon, despite the howls from the oil hawks. Gold fell another $13.00, to $1,086.50. Silver slid 44 cents, to $16.43. The drop in the prices of precious metals is quite foreboding, indicating that even holders of wealth fear deflation and another downturn in many of the major economies. A real tip-off that gold had reached its zenith were the number of ads on TV, in newspapers and on the internet looking to exchange cash for gold. It should have been obvious that gold was overvalued when vultures appeared. The irony is that these cash-for-gold bugs will be squashed when the price bottoms. Another industry hitting the skids.
How To Create Your Own Currency
First a definition, from dictionary.com:
1. something that is used as a medium of exchange; money.
2. general acceptance; prevalence; vogue.
3. a time or period during which something is widely accepted and circulated.
4. the fact or quality of being widely accepted and circulated from person to person.
5. circulation, as of coin.
Obviously, your currency must be something that people will use in exchange, barter, trade or for payment. It should be widely accepted and have value, and, though this is not a part of the definition - it applies - it should be in ample, ready supply.
The easiest way to explain how to create your own currency, for me, is to relate the story of how I did it, inadvertently, and without knowing I was doing it.
Back in 1982, I started up a free newspaper in downtown Rochester, New York. Appropriately, it was called, Downtown, the Unbound Magazine, later, it became known as the more common, Downtown Magazine.
My currency, though I did not know it at the time, was blank space on the pages of my fledgling newspaper. The paper carried stories of interest to locals and advertisements appealing to the same. I quickly found that writing favorable articles about people, or articles that appealed to large numbers of people (anti-government populism, mostly) won me praise, notoriety and more, including the company of beautiful women, free drinks at local pubs and other assorted niceties from merchants and the general public alike.
Once the paper became widely circulated, my living expenses dropped dramatically. I had too much to eat, drink and be merry. The blank space in my weekly newspaper, filled with appealing stories, was my first currency. I could trade it for favors, food, and much more.
Even more powerful was the advertising space. That was the currency that really clicked. I could go to virtually any merchant in my market and work a deal for cash and/or goods and services. I traded advertising for a monthly allotment of fine men's clothing. I traded restaurant reviews for cash and meals. Anything I wanted, I could get without money, because i had my own currency, which was, after all, a useful means of exchange of ideas, goods, services and good will.
My little newspaper expanded to a point at which I was able to purchase (this with real money) a chain of rural weeklies, printing presses, and a building in which my entire operation was housed. Trading ad space for everything from clothes to event tickets to transportation was available to me because my ad space had value and was widely accepted.
That's it. Get yourself into a business at which you can deliver quality goods or services at a reasonable price to a wide swath of customers and you'll never want for much of anything ever again.
All it takes is a little neediness, desire, persistence and plenty of hard work. Sound familiar? It should. It's how our great nation was built.
First, however, a quick look at today's financial market action.
Stocks were bounding around in negative territory for most of the session, until the FOMC rate policy decision came out at 2:00 pm. As this was the least hyped Fed meeting in many months, little was expected to change in either the rates or the language. The economy is clearly slip-sliding along, and fears that the recovery is more myth than meat have recently come to the surface.
Nevertheless, stocks staged a little bit of a rally, mostly on news that the Fed would continue doling out scads of free money, at nearly a zero interest rate. Banks which have rights to the discount window are making out like bandits, as they can now pick and choose with whom they desire to do business, which means that Mr. Average Joe with a sound business idea is more likely to get laughed out of the bank rather than be treated with respect. Either that, or the bank will offer him a loan at some ungodly, usurious rate of 25% interest, or more.
The major banks which feed at the trough of the Federal Reserve are lending plenty to people who are buying real estate at distressed levels and/or have businesses the banks want to be a part of. Lending is going primarily to huge corporations in a final push for the perceived goal of Nazi-style fascism, in which the government and big business are in cahoots and the middle and lower classes foot the bill and struggle for existence.
That's good for Wall Street, as today's numbers reinforce the argument that bigger is better and may be all that matters.
Dow 10,236.16, +41.87 (0.41%)
NASDAQ 2,221.41, +17.68 (0.80%)
S&P 500 1,097.50, +5.33 (0.49%)
NYSE Composite 7,035.61, +7.29 (0.10%)
Advancing issued edged decliners, 3391-3082. New highs were 128, to 87 new lows, the closest gap between the two since June, 2009. The market is about to turn over completely in a new downturn which could be severe. Stocks are already off 4-6% from their highs and another 5% drop could easily occur within the next month. Volume was good, though shaky.
NYSE Volume 6,175,805,500
NASDAQ Volume 2,492,886,750
Oil gained 33 cents, to $74.00, a ridiculous number considering not only supply and demand issues, but general trends in the global economy. Expect to see oil under $70/barrel soon, despite the howls from the oil hawks. Gold fell another $13.00, to $1,086.50. Silver slid 44 cents, to $16.43. The drop in the prices of precious metals is quite foreboding, indicating that even holders of wealth fear deflation and another downturn in many of the major economies. A real tip-off that gold had reached its zenith were the number of ads on TV, in newspapers and on the internet looking to exchange cash for gold. It should have been obvious that gold was overvalued when vultures appeared. The irony is that these cash-for-gold bugs will be squashed when the price bottoms. Another industry hitting the skids.
How To Create Your Own Currency
First a definition, from dictionary.com:
1. something that is used as a medium of exchange; money.
2. general acceptance; prevalence; vogue.
3. a time or period during which something is widely accepted and circulated.
4. the fact or quality of being widely accepted and circulated from person to person.
5. circulation, as of coin.
Obviously, your currency must be something that people will use in exchange, barter, trade or for payment. It should be widely accepted and have value, and, though this is not a part of the definition - it applies - it should be in ample, ready supply.
The easiest way to explain how to create your own currency, for me, is to relate the story of how I did it, inadvertently, and without knowing I was doing it.
Back in 1982, I started up a free newspaper in downtown Rochester, New York. Appropriately, it was called, Downtown, the Unbound Magazine, later, it became known as the more common, Downtown Magazine.
My currency, though I did not know it at the time, was blank space on the pages of my fledgling newspaper. The paper carried stories of interest to locals and advertisements appealing to the same. I quickly found that writing favorable articles about people, or articles that appealed to large numbers of people (anti-government populism, mostly) won me praise, notoriety and more, including the company of beautiful women, free drinks at local pubs and other assorted niceties from merchants and the general public alike.
Once the paper became widely circulated, my living expenses dropped dramatically. I had too much to eat, drink and be merry. The blank space in my weekly newspaper, filled with appealing stories, was my first currency. I could trade it for favors, food, and much more.
Even more powerful was the advertising space. That was the currency that really clicked. I could go to virtually any merchant in my market and work a deal for cash and/or goods and services. I traded advertising for a monthly allotment of fine men's clothing. I traded restaurant reviews for cash and meals. Anything I wanted, I could get without money, because i had my own currency, which was, after all, a useful means of exchange of ideas, goods, services and good will.
My little newspaper expanded to a point at which I was able to purchase (this with real money) a chain of rural weeklies, printing presses, and a building in which my entire operation was housed. Trading ad space for everything from clothes to event tickets to transportation was available to me because my ad space had value and was widely accepted.
That's it. Get yourself into a business at which you can deliver quality goods or services at a reasonable price to a wide swath of customers and you'll never want for much of anything ever again.
All it takes is a little neediness, desire, persistence and plenty of hard work. Sound familiar? It should. It's how our great nation was built.
Tuesday, January 26, 2010
The January Barometer Is Sending Sell Signals
I know that yesterday I said I'd write about creating your own currency, but, having spent the bulk of the day poring over New york State Surrogate's Court Procedure (in my case, this is an exercise in learning how to get a house for nothing from Bank of America, but that's another matter), I haven't had time to crystalize my thinking on the topic. Suffice it to be said that anyone can create their own currency, the trick being getting others to accept it. I will make every effort to cover this enticing topic tomorrow.
As for today, the stock players didn't do well. Markets were decidedly higher in the AM, but began to unravel in pretty distinctive fashion around 2:00 pm EST. In other words, the nascent rally tanked into oblivion, leaving investors and fund managers holding a little bit less than they did yesterday. All averages were lower on the day, though the Dow performed better than the others.
As of Friday, the major indices had fallen below where they closed 2009, bring us to the first 2010 mention of the "January Barometer," which invokes the old saw, "as goes January, so goes the rest of the year." The theory, which holds true 90% of the time, is based upon the movement of the S&P 500. It was dead wrong last year as stocks sulked in January and February, but made up the lost ground and then some beginning in March.
So far this year, the S&P is down, from 1115.10 on December 31, 2009, to today's close, so, unless the market decides not to continue to scare the bejesus out of everyone, the tone will be set for a losing year on Wall Street. Hogwash! Balderdash! The nerve of some people to suggest that one could lose money investing in stocks. Unheard of!
Well, since the predictive value of this "barometer" is 90%, and it was off last year (I know, I know, that doesn't change the odds), I'd be looking for some downside movement over the next month to six months, for starters.
Dow 10,194.29, -2.57 (0.03%)
NASDAQ 2,203.73, -7.07 (0.32%)
S&P 500 1,092.17, -4.61 (0.42%)
NYSE Composite 7,028.32, -44.81 (0.63%)
Declining issues danced on the heads of advancers, 4283-2220, belying the soft headline numbers. It's just this kind of stealth movement that sets up investors for a nasty roller coaster ride. The gap between new highs and new lows narrowed to 161-78, with the lows rising to their highest level in at least a month. The turn is upon us. The market appears to have done everything but roll over, but there's every indication that it will. Volume was better than yesterday, though nowhere near as robust as the selling days of the past week, another indicator pointing towards the floor.
NYSE Volume 5,477,897,000
NASDAQ Volume 2,406,876,000
Like stocks, commodities didn't move much. Oil fell 3 cents, to $74.68. Gold was up $3.20, to close at an even $1,100.00. Silver continues to take the brunt of the selling, off another 31 cents, to $16.84. The selling in gold and silver seems to be based upon speculation that the dollar's decline is over. For much more on that topic, from a person with eminently more knowledge than myself, I direct you to commentary from Kitko's John Nadler.
Considering the massive move in gold - less so in silver - over the past decade, a correction on the back of a rising dollar makes plenty of sense. If, as I've been saying for years, and the Fed has been fighting for an even longer time, deflation continues to be the crazy aunt in the attic which nobody particularly cares to have roaming about the house in free fashion.
All one has to do these days is go food shopping at the neighborhood market to see deflation in progress. Or, head to a dollar store or witness the fast food chains pushing not prices lower, but portions higher - for the same price, a la Burger King's larger-than-McDonald's double cheeseburger (it is bigger and, yes, better) to understand the dynamics of deflation, which begs the question, if people are willing to pay to lose weight (Weight Watchers, Jenny Craig, etc.), shouldn't restaurants pay us to eat?
It may come to that.
As for today, the stock players didn't do well. Markets were decidedly higher in the AM, but began to unravel in pretty distinctive fashion around 2:00 pm EST. In other words, the nascent rally tanked into oblivion, leaving investors and fund managers holding a little bit less than they did yesterday. All averages were lower on the day, though the Dow performed better than the others.
As of Friday, the major indices had fallen below where they closed 2009, bring us to the first 2010 mention of the "January Barometer," which invokes the old saw, "as goes January, so goes the rest of the year." The theory, which holds true 90% of the time, is based upon the movement of the S&P 500. It was dead wrong last year as stocks sulked in January and February, but made up the lost ground and then some beginning in March.
So far this year, the S&P is down, from 1115.10 on December 31, 2009, to today's close, so, unless the market decides not to continue to scare the bejesus out of everyone, the tone will be set for a losing year on Wall Street. Hogwash! Balderdash! The nerve of some people to suggest that one could lose money investing in stocks. Unheard of!
Well, since the predictive value of this "barometer" is 90%, and it was off last year (I know, I know, that doesn't change the odds), I'd be looking for some downside movement over the next month to six months, for starters.
Dow 10,194.29, -2.57 (0.03%)
NASDAQ 2,203.73, -7.07 (0.32%)
S&P 500 1,092.17, -4.61 (0.42%)
NYSE Composite 7,028.32, -44.81 (0.63%)
Declining issues danced on the heads of advancers, 4283-2220, belying the soft headline numbers. It's just this kind of stealth movement that sets up investors for a nasty roller coaster ride. The gap between new highs and new lows narrowed to 161-78, with the lows rising to their highest level in at least a month. The turn is upon us. The market appears to have done everything but roll over, but there's every indication that it will. Volume was better than yesterday, though nowhere near as robust as the selling days of the past week, another indicator pointing towards the floor.
NYSE Volume 5,477,897,000
NASDAQ Volume 2,406,876,000
Like stocks, commodities didn't move much. Oil fell 3 cents, to $74.68. Gold was up $3.20, to close at an even $1,100.00. Silver continues to take the brunt of the selling, off another 31 cents, to $16.84. The selling in gold and silver seems to be based upon speculation that the dollar's decline is over. For much more on that topic, from a person with eminently more knowledge than myself, I direct you to commentary from Kitko's John Nadler.
Considering the massive move in gold - less so in silver - over the past decade, a correction on the back of a rising dollar makes plenty of sense. If, as I've been saying for years, and the Fed has been fighting for an even longer time, deflation continues to be the crazy aunt in the attic which nobody particularly cares to have roaming about the house in free fashion.
All one has to do these days is go food shopping at the neighborhood market to see deflation in progress. Or, head to a dollar store or witness the fast food chains pushing not prices lower, but portions higher - for the same price, a la Burger King's larger-than-McDonald's double cheeseburger (it is bigger and, yes, better) to understand the dynamics of deflation, which begs the question, if people are willing to pay to lose weight (Weight Watchers, Jenny Craig, etc.), shouldn't restaurants pay us to eat?
It may come to that.
Thursday, November 12, 2009
S&P Confirmation Not Enough; Markets Trumped by Strong Dollar
As much as one would like to believe Tim Geithner's commitment to a strong dollar policy, skepticism will remain high until there's actual action behind his words. In the absence of official US action to strengthen the greenback, finance officials of other nations have apparently taken action over the past few days, boosting the dollar from a low of 74.8 on Wednesday morning to a high of 75.76 just before 4:00 pm ET today.
Continued weakness in the US dollar has been causing all manner of market distortions, especially in commodity and US equity markets. The trade over the past 6 months has been an easy inverse relationship between the dollar and US equities. Cheaper dollars made stocks cheaper to purchase, fueling a powerful rally in stocks. However, the relationship is eventually unsustainable, though breaking the vexing inverse trade will take more of the kind of quiet intervention witnessed today.
Leading the charge was the Euro, which fell sharply against the US dollar. It's almost a European mandate, as the high Euro is making European products more costly, thus, less competitive in world markets. There seems to be a concerted effort to strengthen the dollar - despite the subdued protestations by US officials and stock traders - at the expense of the Euro, the target level appearing to be somewhere above 76 on the dollar index. The target would appear to be somewhere below 1.45 Euros to the US Dollar, which will take some doing, as the Euro currently trades at 1.4842 to 1 US Dollar. The result will be a more competitive environment for European products and a moderation in the prices of US stocks.
Eventually, the weak dollar trade must be unwound because it is entirely wrong for the US. It's akin to selling the same products at lower and lower prices in each business cycle in a fire sale environment. The US standard of living would continue to fall as the currency is debased. As much as the Fed and Treasury are attempting such a debasement - with grand success thus far - our trading partners are not happy with the arrangement. While the eventuality of a debased US currency may be a fait acompli, current movement in the forex markets are forestalling the event as much as possible.
As the dollar gained strength today, stocks fell, cutting short the nascent rally which began last week. Markets once again seem to have topped out temporarily, and it may actually be time for a serious reversal, much of which will have little to do with fundamental valuations and more to do with technical levels driven by the dollar trade.
Confirmation of the new Dow Industrial highs, which were narrowly confirmed by the S&P yesterday, weren't enough to stop stocks from skidding lower. The Dow Transports fell sharply in non-confirmation, setting the stage for more downside in stocks.
Dow 10,197.47, -93.79 (0.91%)
NASDAQ 2,149.02, -17.88 (0.83%)
S&P 500 1,087.24, -11.27 (1.03%)
NYSE Composite 7,063.05, -92.31 (1.29%)
declining issues danced all over advancers on the day, 4558-1285, or about 5:2. There were 273 new highs to 86 new lows, a margin significantly narrower than yesterday's. Volume remained tepid.
NYSE Volume 4,341,626,500
NASDAQ Volume 2,219,716,750
Commodities were slammed by the dollar rise. Crude oil fell $2.34, to $76.94, with more downside indicated, as warm weather in the US Northeast and slack demand helped push down prices for all energy products. Gold was off $8.00, to $1,106.50, with silver falling 28 cents, back to $17.27.
The deflation trade reared its head once again, and it probably won't be the last time.
Continued weakness in the US dollar has been causing all manner of market distortions, especially in commodity and US equity markets. The trade over the past 6 months has been an easy inverse relationship between the dollar and US equities. Cheaper dollars made stocks cheaper to purchase, fueling a powerful rally in stocks. However, the relationship is eventually unsustainable, though breaking the vexing inverse trade will take more of the kind of quiet intervention witnessed today.
Leading the charge was the Euro, which fell sharply against the US dollar. It's almost a European mandate, as the high Euro is making European products more costly, thus, less competitive in world markets. There seems to be a concerted effort to strengthen the dollar - despite the subdued protestations by US officials and stock traders - at the expense of the Euro, the target level appearing to be somewhere above 76 on the dollar index. The target would appear to be somewhere below 1.45 Euros to the US Dollar, which will take some doing, as the Euro currently trades at 1.4842 to 1 US Dollar. The result will be a more competitive environment for European products and a moderation in the prices of US stocks.
Eventually, the weak dollar trade must be unwound because it is entirely wrong for the US. It's akin to selling the same products at lower and lower prices in each business cycle in a fire sale environment. The US standard of living would continue to fall as the currency is debased. As much as the Fed and Treasury are attempting such a debasement - with grand success thus far - our trading partners are not happy with the arrangement. While the eventuality of a debased US currency may be a fait acompli, current movement in the forex markets are forestalling the event as much as possible.
As the dollar gained strength today, stocks fell, cutting short the nascent rally which began last week. Markets once again seem to have topped out temporarily, and it may actually be time for a serious reversal, much of which will have little to do with fundamental valuations and more to do with technical levels driven by the dollar trade.
Confirmation of the new Dow Industrial highs, which were narrowly confirmed by the S&P yesterday, weren't enough to stop stocks from skidding lower. The Dow Transports fell sharply in non-confirmation, setting the stage for more downside in stocks.
Dow 10,197.47, -93.79 (0.91%)
NASDAQ 2,149.02, -17.88 (0.83%)
S&P 500 1,087.24, -11.27 (1.03%)
NYSE Composite 7,063.05, -92.31 (1.29%)
declining issues danced all over advancers on the day, 4558-1285, or about 5:2. There were 273 new highs to 86 new lows, a margin significantly narrower than yesterday's. Volume remained tepid.
NYSE Volume 4,341,626,500
NASDAQ Volume 2,219,716,750
Commodities were slammed by the dollar rise. Crude oil fell $2.34, to $76.94, with more downside indicated, as warm weather in the US Northeast and slack demand helped push down prices for all energy products. Gold was off $8.00, to $1,106.50, with silver falling 28 cents, back to $17.27.
The deflation trade reared its head once again, and it probably won't be the last time.
Tuesday, July 7, 2009
Bears Bag More Bulls
Those "green shoots" we heard so much about in April and May have apparently withered and died with the onset of summer. Fact of the matter is that the US economy is being kept afloat by a combination of stimulus money, bank accounting rules changes, gobs and gobs of fresh currency via the Federal Reserve and the burgeoning welfare-government state.
US consumers are alternately tapped out or scared, or both, and the tiny steps the federal government has employed thus far have done little to stimulate the economy. Trade flows are down, sales everywhere have redlined and state governments are on the verge of default. In California and New York, the two largest states by population, tax revenues have not kept pace with projections. Incomes are stagnant and tax increases have not filled the budget gaps which threaten to implode the entire apparatus of those two state governments.
With the economy in such desperate throes, stocks - and, for that matter, all other asset classes - cannot sustain current price levels, especially after the huge run-up from March through June. Stocks fell to their worst levels in two months as the Obama administration begins touting another round of stimulus, the latest trial balloon coming from presidential advisor Laura Tyson.
The problem with more stimulus is that it is exactly what won't work. Job creation programs for small business and fiscal restraint from Capitol Hill and state assemblies are the proper medicine. Government spending, the Keynesian solution, is simply piling up new debt that has to be repaid at some later date. The American people have had their fill of deficit spending, but the voices calling for restraint have been silenced and neutered by congress, the administration and the mainstream media. Instead of solving the crisis with spending cuts, the plain truth is that the government now is in a no-win position in which it has to keep spending to prevent the economy from falling even deeper into a deflationary spiral.
Government payments to welfare moms, disabled persons, and the aged are all that's keeping the US economy from complete collapse and taking down most of the rest of the world economies with it.
In all likelihood there will be another stimulus bill, aimed at selected, favored industry groups with their hands always out, instead of the rock-solid small business segment from which 2/3rds of all new jobs are created. We are entering an even more dangerous phase of the recession cycle: another retreat and round of job cuts is not far off. There simply has been no new job creation for more than 18 months, and with the recession by most accounts now stretching into month 20 or longer, it's time for the big wigs to admit that this one is different, longer, deeper and more serious than anyone has previously thought.
We're hurtling headlong into the most severe crisis in the history of our nation. Worse than the Great Depression and possibly even the Civil War. We are looking at the complete destruction of our financial system, fiat currency, Federal Reserve system and all the rest. The damage done by years of neglect, greed and horrible decisions by the Fed and Treasury is likely far beyond the understanding of even the brightest economists. We are in uncharted territory and the crowd which got us into it - the Larry Summers, Ben Bernankes, Tim Geithners, et. al., are uniquely unequipped to get us out of it.
By this time next year we could see vast segments of the economy completely wiped away, the currency (Federal Reserve Notes) unwanted by foreigners and US citizens alike, and a return to hard cash and barter. Nothing the government has done or will do (unless they have some miracle cure) will save us from currency debasement. It's going to be a long, hard time for many and not over in just a couple of months or years. This depression will last well into the next decade, probably until at least 2013.
On the day, stocks continued their descent back to the March lows. There's almost no doubt that we'll revisit the 6500 level on the Dow before year's end. The Dow has lost some 637 points since its close of 8799 on June 12.
Dow 8,163.60, -161.27 (1.94%)
Nasdaq 1,746.17, -41.23 (2.31%)
S&P 500 881.03, -17.69 (1.97%)
NYSE Composite 5,654.64, -115.36 (2.00%)
Today's trading was a continuation of Monday's downbeat tone, but with more participants on the selling side. Advancing issues were bludgeoned by losers, with declining issues ahead, 4879-1498. New lows continued their recent trend of outnumbering new highs, 76-43. Volume continued to be anemic, but these low trading levels are becoming a permanent feature of the market as many participants have either tapped out or left for either safer or more lucrative venues.
NYSE Volume 1,107,764,000
Nasdaq Volume 2,047,618,000
Oil took it on the chin again, losing $1.12, to $62.93. Other energy-related commodities registered similar declines. Gold bucked the trend with a gain of $4.80, finishing at $929.10. Silver lost 2 cents, to $13.22, just below the point at which old silver coins produce a melt value 10 times their face value.
Stocks and commodities should continue to fall over the next few weeks and continue their downward trajectory into the late summer and fall months. Second quarter earnings from US corporations are predicted to be marginally better than those from the first quarter, and how investors treat the news should provide direction for the overall market. The betting is that most will not be happy with "less bad" at this juncture. Investors with cash on the line will want to see actual improvement in reports. If not, profits will be quickly taken off the table, leading to another round of outright selling in which nobody wants to be left holding the bag. The final week of July and first two weeks of August could be quite disruptive to many portfolios, rivaling the declines seen last fall and earlier this year.
We are headed for a sizable shakeout. Alcoa (AA) starts the earnings parade on Wednesday.
US consumers are alternately tapped out or scared, or both, and the tiny steps the federal government has employed thus far have done little to stimulate the economy. Trade flows are down, sales everywhere have redlined and state governments are on the verge of default. In California and New York, the two largest states by population, tax revenues have not kept pace with projections. Incomes are stagnant and tax increases have not filled the budget gaps which threaten to implode the entire apparatus of those two state governments.
With the economy in such desperate throes, stocks - and, for that matter, all other asset classes - cannot sustain current price levels, especially after the huge run-up from March through June. Stocks fell to their worst levels in two months as the Obama administration begins touting another round of stimulus, the latest trial balloon coming from presidential advisor Laura Tyson.
The problem with more stimulus is that it is exactly what won't work. Job creation programs for small business and fiscal restraint from Capitol Hill and state assemblies are the proper medicine. Government spending, the Keynesian solution, is simply piling up new debt that has to be repaid at some later date. The American people have had their fill of deficit spending, but the voices calling for restraint have been silenced and neutered by congress, the administration and the mainstream media. Instead of solving the crisis with spending cuts, the plain truth is that the government now is in a no-win position in which it has to keep spending to prevent the economy from falling even deeper into a deflationary spiral.
Government payments to welfare moms, disabled persons, and the aged are all that's keeping the US economy from complete collapse and taking down most of the rest of the world economies with it.
In all likelihood there will be another stimulus bill, aimed at selected, favored industry groups with their hands always out, instead of the rock-solid small business segment from which 2/3rds of all new jobs are created. We are entering an even more dangerous phase of the recession cycle: another retreat and round of job cuts is not far off. There simply has been no new job creation for more than 18 months, and with the recession by most accounts now stretching into month 20 or longer, it's time for the big wigs to admit that this one is different, longer, deeper and more serious than anyone has previously thought.
We're hurtling headlong into the most severe crisis in the history of our nation. Worse than the Great Depression and possibly even the Civil War. We are looking at the complete destruction of our financial system, fiat currency, Federal Reserve system and all the rest. The damage done by years of neglect, greed and horrible decisions by the Fed and Treasury is likely far beyond the understanding of even the brightest economists. We are in uncharted territory and the crowd which got us into it - the Larry Summers, Ben Bernankes, Tim Geithners, et. al., are uniquely unequipped to get us out of it.
By this time next year we could see vast segments of the economy completely wiped away, the currency (Federal Reserve Notes) unwanted by foreigners and US citizens alike, and a return to hard cash and barter. Nothing the government has done or will do (unless they have some miracle cure) will save us from currency debasement. It's going to be a long, hard time for many and not over in just a couple of months or years. This depression will last well into the next decade, probably until at least 2013.
On the day, stocks continued their descent back to the March lows. There's almost no doubt that we'll revisit the 6500 level on the Dow before year's end. The Dow has lost some 637 points since its close of 8799 on June 12.
Dow 8,163.60, -161.27 (1.94%)
Nasdaq 1,746.17, -41.23 (2.31%)
S&P 500 881.03, -17.69 (1.97%)
NYSE Composite 5,654.64, -115.36 (2.00%)
Today's trading was a continuation of Monday's downbeat tone, but with more participants on the selling side. Advancing issues were bludgeoned by losers, with declining issues ahead, 4879-1498. New lows continued their recent trend of outnumbering new highs, 76-43. Volume continued to be anemic, but these low trading levels are becoming a permanent feature of the market as many participants have either tapped out or left for either safer or more lucrative venues.
NYSE Volume 1,107,764,000
Nasdaq Volume 2,047,618,000
Oil took it on the chin again, losing $1.12, to $62.93. Other energy-related commodities registered similar declines. Gold bucked the trend with a gain of $4.80, finishing at $929.10. Silver lost 2 cents, to $13.22, just below the point at which old silver coins produce a melt value 10 times their face value.
Stocks and commodities should continue to fall over the next few weeks and continue their downward trajectory into the late summer and fall months. Second quarter earnings from US corporations are predicted to be marginally better than those from the first quarter, and how investors treat the news should provide direction for the overall market. The betting is that most will not be happy with "less bad" at this juncture. Investors with cash on the line will want to see actual improvement in reports. If not, profits will be quickly taken off the table, leading to another round of outright selling in which nobody wants to be left holding the bag. The final week of July and first two weeks of August could be quite disruptive to many portfolios, rivaling the declines seen last fall and earlier this year.
We are headed for a sizable shakeout. Alcoa (AA) starts the earnings parade on Wednesday.
Tuesday, May 12, 2009
No Stopping the Industrial Giants
The stock markets are rigged. There, I said it. somebody mentioned that Goldman Sachs handles 20% of all the trades on the NYSE and NASDAQ exchanges. I tend to believe that, especially considering how one-sided the markets have become over the past two months.
It's a one-way bet, just like it was during the post-9/11 era, or, actually, as soon as the Iraq war began. Everything just keeps going up.
Now, I have nothing against profitable trading, I just think profits should be made by investing in companies with good fundamentals, growing earnings, dividends, things like that. The biggest leaders of the recent climb have been banks, many of which were on the brink of failure just a few months back, and were saved by infusions of cash from taxpayers.
That's not what I call sustainable or sound business. Eventually, I will be found to have been right all along. It will become apparent that Citigroup and Bank of America are insolvent. That JP Morgan has too much derivative exposure that they don't like to talk about, and that Goldman Sachs does manipulate the market at the behest of the Federal Reserve, itself a chimera of an organization, one which creates currency out of thin air. How can that be a viable business?
Others agree with me that the "dead cat bounce" has been overdone. Here's one.
Then there's talk of Social Security and Medicare going belly-up before they're supposed to. Well, even the idea that they are going to go broke should be cause enough to reform or dispose of these awful entitlements which are bankrupting the country, turning productive people and resources into wards of the state and, though they provide capital into the system, are nothing more than the manifestation of the worst form of the welfare state.
Dow 8,469.11, +50.34 (0.60%)
NASDAQ 1,715.92, -15.32 (0.88%)
S&P 500 908.35, -0.89 (0.10%)
NYSE Composite 5,859.14, +9.84 (0.17%)
Yesterday, I was reporting how the NASDAQ stocks fared much better than their counterpart indices. Today the opposite is the case, with Dow stocks leading the way. So, which is it? Old, stodgy industrials or new-age tech companies at which we should be throwing our money? Neither is likely the case. Gold or silver will outperform them both, as they have for the past five years.
Just to confuse matters further on one of the more confounding sessions of late, declining issues dominated advancers, 3885-2650. New lows: 73; New highs: 38. Volume was light.
NYSE Volume 1,611,161,000
NASDAQ Volume 2,529,090,000
The government continues to borrow and spend at a record-shattering pace. Americans will be paying through their eyeteeth until their dying breath just for the money being wasted trying to prevent the economy falling into an orderly and well-deserved depression. All they're doing is delaying the inevitable and making matters worse. The luckiest people on the planet today are those who know they don't have long to live. They won't be around to witness or deal with the devastation.
Crude oil was up another 35 cents, to $58.69, but gold gained more, rising $10.40, to $923.90. Silver shot up another 31 cents, to $14.22. They're probably all overpriced, but especially oil. When PPI and CPI figures are released later this week, there's likely to be some pull-back in all commodity prices. The economy is still just puttering along at a snail's pace. Growth is more than 9 months away.
Bonds were unmoved and the dollar was descending last we noticed.
It's a one-way bet, just like it was during the post-9/11 era, or, actually, as soon as the Iraq war began. Everything just keeps going up.
Now, I have nothing against profitable trading, I just think profits should be made by investing in companies with good fundamentals, growing earnings, dividends, things like that. The biggest leaders of the recent climb have been banks, many of which were on the brink of failure just a few months back, and were saved by infusions of cash from taxpayers.
That's not what I call sustainable or sound business. Eventually, I will be found to have been right all along. It will become apparent that Citigroup and Bank of America are insolvent. That JP Morgan has too much derivative exposure that they don't like to talk about, and that Goldman Sachs does manipulate the market at the behest of the Federal Reserve, itself a chimera of an organization, one which creates currency out of thin air. How can that be a viable business?
Others agree with me that the "dead cat bounce" has been overdone. Here's one.
Then there's talk of Social Security and Medicare going belly-up before they're supposed to. Well, even the idea that they are going to go broke should be cause enough to reform or dispose of these awful entitlements which are bankrupting the country, turning productive people and resources into wards of the state and, though they provide capital into the system, are nothing more than the manifestation of the worst form of the welfare state.
Dow 8,469.11, +50.34 (0.60%)
NASDAQ 1,715.92, -15.32 (0.88%)
S&P 500 908.35, -0.89 (0.10%)
NYSE Composite 5,859.14, +9.84 (0.17%)
Yesterday, I was reporting how the NASDAQ stocks fared much better than their counterpart indices. Today the opposite is the case, with Dow stocks leading the way. So, which is it? Old, stodgy industrials or new-age tech companies at which we should be throwing our money? Neither is likely the case. Gold or silver will outperform them both, as they have for the past five years.
Just to confuse matters further on one of the more confounding sessions of late, declining issues dominated advancers, 3885-2650. New lows: 73; New highs: 38. Volume was light.
NYSE Volume 1,611,161,000
NASDAQ Volume 2,529,090,000
The government continues to borrow and spend at a record-shattering pace. Americans will be paying through their eyeteeth until their dying breath just for the money being wasted trying to prevent the economy falling into an orderly and well-deserved depression. All they're doing is delaying the inevitable and making matters worse. The luckiest people on the planet today are those who know they don't have long to live. They won't be around to witness or deal with the devastation.
Crude oil was up another 35 cents, to $58.69, but gold gained more, rising $10.40, to $923.90. Silver shot up another 31 cents, to $14.22. They're probably all overpriced, but especially oil. When PPI and CPI figures are released later this week, there's likely to be some pull-back in all commodity prices. The economy is still just puttering along at a snail's pace. Growth is more than 9 months away.
Bonds were unmoved and the dollar was descending last we noticed.
Thursday, December 28, 2006
2007 Predictions (part 1)
With 2006 winding down, everybody's out with predictions for 2007, so I thought I would follow the crowd for a change and throw down a few of my own observations before the clock runs out.
Since there are two trading days remaining, I'm going to cut my predictions into two parts, covering currency, interest rates and commodities today and the stock markets, economic trends and some political observations tomorrow.
Taking a somewhat more cynical view of markets as opposed to some of the more supply/demand theorists, I'm presaging my prophecies with a couple of caveats: 1. The Democratically-controlled Congress will restore a sense of fairness and balance to the country as a whole while putting some pressure on the administration for fiscal restraint; 2. Our lame duck president will remain stubbornly in opposition to public opinion on Iraq and the faux war on terror and face calls for resignation or face impeachment as early as Spring. (For more on my views on impeachment, see my political blog.)
Currencies: Stabilizing dollar
After years and years of dollar depreciation, the tide may finally begin to roll out. The demise of the Dollar vs. the Euro is vividly revealed in this Euro to US$ chart.
Since reaching parity (1$ = 1EUR) late in 2002, it's been a pretty steady path of appreciation for the Euro at the Dollar's expense though the trend has definitely slowed since the peak in December 2004. It was at that point that the Fed hiked rates 25 basis points to 2.25% and the fifth consecutive rate increase, with the first in June, 2004, when the rate was finally moved off the 1% "emergency" rate to 1.25.
Since then, the Fed raised rates for a total of 17 consecutive meetings, the last of which was June 2006, when the FOMC finished their upwards adjustment at 5.25%, where it stands today.
So, there is no correlation between US interest rates and the value of the dollar versus foreign currencies.
Talk of the death of the dollar has been strong lately, however, but wildly overstated. The abrupt change by Iran - to price their oil in Euros rather than dollars - and the flight of some Gulf nations to ease their foreign reserves and investment funds partially out of US Dollars likely has more to do with politics than money, though the two are closely affiliated.
If the US isn't getting the message that meddling in the Middle east has reached its limit, maybe moving some money away from US investments may get our attention... at least that's what it looks like from afar.
Since we're reaching a double bottom in the Euro-Dollar trade, I expect the dollar to bounce between 1.33 and 1.18 in 2007, with the main triggers being our international relations and how well the Congress reigns in spending.
Interest Rates: Little change
The Fed is now 4 meetings into stand pat mode, fixing the Fed funds rate at a very fair 5.25% and that's not likely to change dramatically. The first half of 2007 may see some slowing of the economy and calls to ease rates, but the Fed will not see a recession looming and will choose to err on the side of prudence, keeping rates the same at least through June.
The June meeting may be the most propitious time for the Fed to make a move as the economy will look like it's stalling out, but with inflation not likely to be much of a concern in a slowing environment, raising rates will be pretty much out of the equation as well.
It's going to be a boring year to be an economist as we move politically and economically back to the center and further away from the radicalism of the previous six years.
Commodities: Lower prices good for all
In the commodities field, lower oil prices are going to keep the economy on an even keel. Oil prices have been going south generally for the past six months and the new political climate is likely to foment more declines in crude and gasoline.
There's a glut of goods and raw materials in the US and to a lesser extent worldwide and distribution will be a key. China will not be able to continue expanding at their breakneck pace as the developed nations will experience slow growth. The overriding factors of globalization and reduced demand for imports to the US should keep prices for functional commodities - copper, silver, zinc, oil, natural gas, coal and timber - somewhat in check.
There will be opportunities for reasonable gains both on the short and long sides, but these occasions will be short-lived. The overall trend will be lower with gold bottoming out in the $550-575 range, silver backing up to $10.75/oz. and copper easing to a more reasonable 2.15 per pound.
Another warm winter, courtesy of global warming, will contribute to keep oil below $60/bbl. for much of the year. A fall below $50 is not out of the question and stabilization in the $44-47 range is a distinct possibility by Fall.
The continued slowdown in the US housing market will be the main factor driving all commodity prices lower.
Tomorrow: Stocks, trends and politics.
Since there are two trading days remaining, I'm going to cut my predictions into two parts, covering currency, interest rates and commodities today and the stock markets, economic trends and some political observations tomorrow.
Taking a somewhat more cynical view of markets as opposed to some of the more supply/demand theorists, I'm presaging my prophecies with a couple of caveats: 1. The Democratically-controlled Congress will restore a sense of fairness and balance to the country as a whole while putting some pressure on the administration for fiscal restraint; 2. Our lame duck president will remain stubbornly in opposition to public opinion on Iraq and the faux war on terror and face calls for resignation or face impeachment as early as Spring. (For more on my views on impeachment, see my political blog.)
Currencies: Stabilizing dollar
After years and years of dollar depreciation, the tide may finally begin to roll out. The demise of the Dollar vs. the Euro is vividly revealed in this Euro to US$ chart.
Since reaching parity (1$ = 1EUR) late in 2002, it's been a pretty steady path of appreciation for the Euro at the Dollar's expense though the trend has definitely slowed since the peak in December 2004. It was at that point that the Fed hiked rates 25 basis points to 2.25% and the fifth consecutive rate increase, with the first in June, 2004, when the rate was finally moved off the 1% "emergency" rate to 1.25.
Since then, the Fed raised rates for a total of 17 consecutive meetings, the last of which was June 2006, when the FOMC finished their upwards adjustment at 5.25%, where it stands today.
So, there is no correlation between US interest rates and the value of the dollar versus foreign currencies.
Talk of the death of the dollar has been strong lately, however, but wildly overstated. The abrupt change by Iran - to price their oil in Euros rather than dollars - and the flight of some Gulf nations to ease their foreign reserves and investment funds partially out of US Dollars likely has more to do with politics than money, though the two are closely affiliated.
If the US isn't getting the message that meddling in the Middle east has reached its limit, maybe moving some money away from US investments may get our attention... at least that's what it looks like from afar.
Since we're reaching a double bottom in the Euro-Dollar trade, I expect the dollar to bounce between 1.33 and 1.18 in 2007, with the main triggers being our international relations and how well the Congress reigns in spending.
Interest Rates: Little change
The Fed is now 4 meetings into stand pat mode, fixing the Fed funds rate at a very fair 5.25% and that's not likely to change dramatically. The first half of 2007 may see some slowing of the economy and calls to ease rates, but the Fed will not see a recession looming and will choose to err on the side of prudence, keeping rates the same at least through June.
The June meeting may be the most propitious time for the Fed to make a move as the economy will look like it's stalling out, but with inflation not likely to be much of a concern in a slowing environment, raising rates will be pretty much out of the equation as well.
It's going to be a boring year to be an economist as we move politically and economically back to the center and further away from the radicalism of the previous six years.
Commodities: Lower prices good for all
In the commodities field, lower oil prices are going to keep the economy on an even keel. Oil prices have been going south generally for the past six months and the new political climate is likely to foment more declines in crude and gasoline.
There's a glut of goods and raw materials in the US and to a lesser extent worldwide and distribution will be a key. China will not be able to continue expanding at their breakneck pace as the developed nations will experience slow growth. The overriding factors of globalization and reduced demand for imports to the US should keep prices for functional commodities - copper, silver, zinc, oil, natural gas, coal and timber - somewhat in check.
There will be opportunities for reasonable gains both on the short and long sides, but these occasions will be short-lived. The overall trend will be lower with gold bottoming out in the $550-575 range, silver backing up to $10.75/oz. and copper easing to a more reasonable 2.15 per pound.
Another warm winter, courtesy of global warming, will contribute to keep oil below $60/bbl. for much of the year. A fall below $50 is not out of the question and stabilization in the $44-47 range is a distinct possibility by Fall.
The continued slowdown in the US housing market will be the main factor driving all commodity prices lower.
Tomorrow: Stocks, trends and politics.
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