US equity markets must be the laughing stock of the entire planet. Whenever there's a risk of a serious downturn, especially on days in which Asian and European markets have already taken a hit, the globalists can count on a comedic interlude supplied by insider trading schemes run amok here in the cradle of free market economics and democracy.
Tuesday was just another shining example of how rigged and moronic US stock markets have become after years of manipulation by government operatives generally identified as the President's Working Group on Financial Markets, created in 1988 after the blowup of Long-Term Capital Management (LTCM), by then-president Ronald Reagan with Executive Order 13621, along with complicity by major banking and trading firms such as Goldman Sachs, JP Morgan Chase, Bank of America and Citigroup.
While the existence of the "Working Group" (or PWG, as it has evolved) is a matter of fact, some decry the operations of the group as clandestine market participants (formerly known as the Plunge Protection Team, or PPT), such as this blog entry by Barry Ritholtz, complete with an array of illuminating comments and links.
It's more than plain and obvious that government is working in collusion with major banks, though whether or not they are involved in significant "market pumping" is still an unresolved question. Market volatility has become a semi-permanent fixture in US equity (and other) markets for many years, and recent policy decisions mostly made by the Federal Reserve, to ensure liquidity, and the Senate, to bail out generally-insolvent banks and states suffering from enormous budget shortfalls, beg the question.
The Fed's official federal funds interest rate has been at it's lowest level in history for 18 months (since December 2008) and while equity markets have bounced off their March 2009 significantly, there's worry that the momentum cannot be maintained. The Fed is pretty much out of bullets, but underhanded trading schemes should be able to avert another major market collapse for the near term.
That's the general condition of US equity markets today: volatile, manipulated and operating on the adrenaline of fear while the talking heads on CNBC glad-hand the purveyors of the pump all day, every day, relentlessly trotting out this or that analyst or trader with positive spin, keeping the whole charade of "recovery, growth and prosperity" churning along.
Meanwhile, the major indices have fallen below their 50-day moving averages and a sitting upon their 200-day MAs for the most part. Like all other government work, whatever the PWG is doing to prop up markets, they're doing a pretty shabby job of it. The entire US - and, to a large extent, global - financial system resembles a creaking ship adrift at sea, burdened by an overload of bad debt, faulty rigging and deficits billowing out of its hold.
Intra-day market actions only help to keep the ship afloat, hoping it can reach shallow enough waters so that when it does sink, it won't be resting too far below the surface.
In sum, market manipulation always fails. One only has to bear witness to the magnificent drops in markets in 2000 and 2008 to verify that point. Government intervention only works in the near-term, pushing the longer-term, systemic issues further out into the future, for another generation or another government to handle. The game cannot continue for long without some major disruption. We've just been through the worst month of May on the markets since 1940, and while the "double-dipsters" have been effectively silenced by the media, the level of fear and apprehension is still palpable.
Pushing markets off their lows through whatever conception available still seems to be bad business and one that cannot eventually, effectively halt the onslaught of dreadful deflation in assets of all classes. Globalization began the deflation process; the banks and inept or corrupt government operators witlessly helped it along. With no way out of what has morphed into a global currency "race to the bottom," equities will eventually falter, flat line or die. The only question is how long it's going to take.
History, always a great guide and usually ignored, provides the best answer, with the operative time period being the Great Depression of 1929-1942. Taking Fall of 2008 as the starting point, we're at roughly the equivalent of September, 1930.
On August 3, 1929, the Dow closed at 381.17. Then came the crash in October and November, with the Dow falling from aournd 352.86 on the 10th of October to 198.69 on the 13th of November, a 44% drop in just over a month, which compares to the Fall of 2008 and Winter, 2009, quite favorably. On the 17th of April, 1930, the Dow rebounded and stood at 294.07, a 48% gain off the lows and a level it would not approach again for nearly 24 years.
Yes, you read that right, 24 years. After the crash of 1929, the market rebounded, just as it did in recent history, from its bottom of 6,547.05, on March 9, 2009, to a peak of 10,725.43 on January 19, 2010, a gain of nearly 64%, though still well short of its all-time high of 14,164.53 on October 9, 2007.
President Herbert Hoover and his Republican counterparts in the banking community and the congress could not revive the slumping US economy, however. On July 8, 1932, the Dow Jones Industrial Average fell to it's all-time low of 41.22, helping usher in FDR and his New Deal policies. Elected in November, 1932, Roosevelt worked quickly to keep Americans out of financial misery, but for many it was too late. The country survived, barely, through the 30s and into World War II, which had been raging in Europe for more than 5 years before the US formally became involved in 1942. It wasn't until February 26, 1954 that the Dow surpassed that 1930 high, closing on that date at 294.54.
Thus, contrary to widely-held beliefs, the crash of 1929 was just a prelude for more pain to come. From the peak in August, 1929, to the bottom in July of 1932, the Dow lost nearly 90% of its value. A similar slide in today's terms would wipe the Dow all the way down to 1450.00, a number not seen since late November 1985, about 9 months into Ronald Reagan's second term as president, in the full throes of the supply side financial revolution.
It's an interesting point in history. From November 1985 to October, 2007, a period of nearly 23 years, the Dow Jones Industrials increased in value some ten-fold. That kind of expansion is unprecedented in economic history and it was largely fueled by low tax rates on wealthy individuals, lax tax compliance by major corporations, and, notably, little advance in the overall wealth, prosperity or wages of the middle class. So, a major, dramatic fall, similar to that of 1930-1932, might still be ahead for those of us who still give a damn.
The timeline of history is not without flaws, to be certain, but, taking the case of a largely manipulated market which is the current, dominant theme in American finances, the overhang of burgeoning federal and state deficits, unresolved banking issues from 2008, it is not outside the realm of possibility that stock markets and the global economy could suffer a blow even more dreadful than the shock of 2008-09. In fact, we are looking at January, 2010 as comparable to April 1930, we have an eerily-similar timeline, with the worst yet to come.
Just as in the Spring of 1930, politicians and financial experts explain how we averted crisis and survived a major financial event. Back then, just as today, nobody knew what was ahead, though today's "experts" apparently have not done a detailed analysis of history, though the one man who may know more about the subject than anyone on the planet, Fed Chairman Ben Bernanke, hasn't exactly sounded the "all-clear" alert. In fact, Bernanke has been assiduously most cautious during this critical period. Though he has reassured the nation that the recession has ended, his remarks of late - few that they are - have been quite tempered and reasoned. Certainly, he reasons that more trouble may lie ahead and his actions - keeping rates low and maintaining full liquidity - speak volumes about his inner thinking.
Should the "recovery" stumble and the economy remain weak, stocks could face armageddon again, though this time, it will be long-lasting and severe, making the episode of 2008-09 look like a walk in the park by comparison.
I'm going to reiterate some of the things I've said repeatedly in various posts over the past three to four years, but they should be maintained within the context of the foregoing discussion. Jobs will continue to be scarce. Prices for everything from gold, to homes, to food, to shoes, will fall demonstrably. The goals of many will be survival, not prosperity. By the time the bulk of the baby boomer generation reaches retirement age - within the next 5-7 years, the Social Security system - already broke - will be running a deficit so large that it will break the will of the markets and the government completely. That event could come sooner, though by no means later than 2017, unless radical changes are made today, and, considering the dithering aspect of the current congress, that doesn't seem likely.
Mortgage interest rates will likely fall to below 3%. Some friends have already told me that their home equity lines are hovering around 2%. Most banks cannot make money with rates at 3-4% long term. More bank failures are a near certainty, possibly peaking in 2012, with the number in the thousands, rather than today's hundreds. Foreclosures and bankruptcies will overwhelm court systems which are already stressed beyond a level at which they can operate efficiently. Inner cities, many already slums of third world order, will become hell-holes of crime and depravity. Suburbs will become vacuous spaces for survivors of the crisis. Most people will cash out of their retirement plans if they can, because they need the cash. The next few years will be telling times indeed.
Now, back to our normally scheduled daily market recap:
The number of bank failures in 2010 reached 78 on Friday, with the FDIC closing down 5 more - three in Florida and one each in Nevada and California.
At the current pace, bank failures this year will easily surpass the total of 140 from 2009. Regulators will likely shut down between 180 and 200 banks this year as the real estate and banking bust widens and deepens.
When markets opened for trading following the three-day holiday, futures pointed to a lower open and that's exactly what occurred, with the Dow off by 80 points and the other major indices following suit... for about five minutes. That's when the usual/unusual pattern reappeared, buyers emerged and by 10:00 am - just 1/2 hour into the trading day - the indices were all either positive or close to it. With the Dow gaining steadily, then leveling off, finally reaching a peak of 10,218, some 84 points above the previous close, the chicanery was in full blossom.
But, by 1:30 in the afternoon, the bloom was off the rose, and stocks began to sell off, just as Asian and European markets had earlier in the day. Finally settling at the break even line about 3:30 pm, the Dow and other indices took on all of their losses in the final half hour of trading, closing at their lowest levels of the day. One can only wonder where stocks might have been had it not been for the underhanded intervention which has become commonplace and remarkably humorous.
Dow 10,024.02, -112.61 (1.11%)
NASDAQ 2,222.33, -34.71 (1.54%)
S&P 500 1,070.71, -18.70 (1.72%)
NYSE Composite 6,661.10, -130.47 (1.92%)
Declining issues eventually overcame advancers, 5170-1374, and the pattern of new lows surpassing new highs emerged once more, 121-98. Volume was very light, a feature that could endure the entire summer and possibly extend deeper into the year.
NYSE Volume 5,695,913,500.00
NASDAQ Volume 2,001,166,750.00
Commodities tried to play along, though there seems to be no saving grace for the price of oil, which fell again today, losing $1.39, to $72.58 on the July contract. Gold bugs were busy at work, snatching up hat they believe to be the "new" currency (and they may be right), boosting the price $12.60, to $1,224.80. Silver also sported a gain, of 13 cents, to $18.54. Prices for gold and silver should be stable to higher at worst, until deflation grabs hold of them and their ardent admirers as well.
With the action on our horribly-manipulated markets notwithstanding, the global economic crisis seems to have entered a new phase, with governments seriously looking at options from reflation to default and everything in between. It's becoming a something of a game of chicken as currencies take turns being beaten down to levels at which their products can compete in various foreign markets.
Here's a new feature:
Death Spiral Watch List:
I'm opening this one up with two companies which seem to be living on borrowed time. One is obvious, that being British Petroleum (BP), which lost another 15% today, down 6.43, to $36.52, as the federal government announced today that it was opening investigations into potential criminal and civil lawsuits (about time). TARGET=6.00
The second may not be such an apparent loser, but it is eBay (EBAY), formerly the world's online auction giant, which, through a series of ill-conceived management decisions launched by CEO John Donahoe, has effectively destroyed the trust of millions of small merchants globally. Ebay has embarked upon a path of dealing comfortably with larger concerns, offering them much lower fees than are afforded the average small business or occasional seller. It's a long, sad and sordid tale, but ebay has been turning the screws on small business with great force for the past two years, and sellers are actively seeking other platforms, tired of the endless game-changing and lack of responsible management. ebay closed down 0.45, to 20.96. Target=4.50
I call this the death spiral syndrome, recalling the demise of Countrywide Financial in 2007-08. The company was once the darling of Wall Street, at one time originating more than 50% of all mortgage loans nationally. Then came the sub-prime crisis and the company, and the rest, as they say, was history. Bank of America finally took over the company for $2/share, which makes one believe that maybe BofA might someday make this list itself. Time will tell.
The death spiral watch list tracks companies which I believe are headed for insolvency - a list that may grow to unprecedented levels should economic conditions continue to worsen.
An interesting point made today on Yahoo! Tech Ticker, which points to the uncertainty we all face:
Showing posts with label depression. Show all posts
Showing posts with label depression. Show all posts
Tuesday, June 1, 2010
Thursday, March 4, 2010
Stocks Surge on Slim News
Despite indications that Friday's non-farm payroll data is going to disappoint - or maybe because of that - stocks continued to trundle forward and have now put together the makings of a fairly nice week of gains.
All of the major indices are poised to post their third weekly gain in the last four and, as of today's close, all but the NYSE Composite are positive for the year.
Data which has been released this week has been mixed, though slightly positive overall. Initial unemployment claims dropped off by 29,000 in the most recent week, but are still stubbornly high at 469,000. A number closer to 300,000 would be indicative that layoffs have stopped and that re-hiring was about to resume, though market participants aren't holding their collective breaths in anticipation of that number. Factory orders showed an impressive 1.7% gain in January, following a solid 1.5% advance in December.
The canary in the coal mine, however, continued to be housing. Pending home sales fell 7.6% in January according to the National Association of Realtors (NAR), which, to almost nobody's surprise, was blamed on the weather, even though the worst storms of the season came in February, not January. Thus, any attempts to paint lipstick on the pig that is residential housing are likely to induce ridicule and groaning.
With the nation almost completely mortgaged to the government due to guarantees by Fannie Mae, Freddie Mac and the other alphabet soup names of agencies sopping up the upside-down mortgage market, there is little hope that the heartland of America's middle class is going to rebound any time soon. Jobs and housing continue to haunt the best efforts of government and financiers, like Freddie Kruger, who just seems to never go away for good.
While Wall Street can whoop it up over earnings and percentages, most of America is suffering, especially state governments. Roughly 4 out of 5 are going to need further assistance from the feds in closing gaping budget shortfalls this year, after being bailed out in 2009. Turning the sublime into the ridiculous, the federal government is about as bankrupt as most of Bernie Madoff's investors, so that, in effect, the states are borrowing borrowed money.
We have come to the point in our history that the obvious cannot be overlooked, though the media and government officials try their best to obfuscate the truth in hopes of retaining or gaining office. Adding together all of the debt - most of it piled on in recent years - and including the unfunded and underfunded mandates such as Medicare and Social Security, every American living today is in hock to the tune of about $430,000.
Any economist who tells you that the money will be paid back is simply a jack-ass lacking common sense. The incredible tax burden needed to hoist such a huge burden off the backs of American citizens would relegate today's and future wage-earners to a level usually reserved for indentured servants. Some make the case that due to the high tax burden already imposed, most Americans are nothing more than wage slaves already, a point that cannot be made too finely nor too bluntly.
While the mechanics of the economy whirr ever onward, the plight of the individual continues to deteriorate. Pay raises, once a commonplace theme in most business environments, have been all but obliterated since the late 1990s, except, of course, in government positions, where financial discipline has been abrogated and handed over to the debt-runners in congress and the presidency. The lower classes get welfare checks and other comforts from the largess of the Treasury; the upper class needs no such relief, having written all they need into the tax codes, leaving the vast middle class in a squeezed situation such as today's, where wages hardly cover the costs associated with common living.
Saving, that relic from the past that our parents and grandparents tried to imbue into us, has been replaced by debt, and that debt has exploded to unreasonable levels in just the past twenty years, threatening to destroy the entire fabric the social compact upon which our country was founded and currently operates.
Retirement, the biggest sham ever invented, is going to be thrust from the American lexicon within the next decade as baby-boom generation workers begin to add to the debt burden in increasing numbers. Taking away benefits from earners is still taboo in Washington, DC, though the decision to either cut benefits or raise taxes will soon be an unavoidable choice, probably within five to six years, if the union lasts that long.
The final insult to the idealist "peace and love" crowd from the 60s will be termination of Social Security for all intents and purposes. Benefits will still be doled out in some form or another, though the level of payments will be ludicrously low in comparison to what previous generations took out. Like all other social entitlement programs, Social Security and Medicare in particular are nothing more than vast Ponzi schemes, using current revenue to pay current beneficiaries. Within years, even possibly months, the balance will tip toward the recipients outnumbering the payers, sending the entire system further into default (It's already over the brink, though nobody will admit it).
What happens when the economy of a nation, brought down by debt burdens too weighty to maintain, implodes, is not a secret. The obvious first victims will be the lame and indigent, as government stipends are reduced or completely shut off. Next would be the chronically poor and illiterate, who do not possess enough brain power or initiative to fend for themselves.
The upper class will feel only slight pain, most of the anguish being sustained by the 60-70% of the population in the middle. Good jobs will be hard to come by, families will be forced to live together as in the Great Depression of the 1930s, and, though prices for everything from food to fuel will be forced lower (though that's arguable in the case of utilities and health care, which will raise prices on fewer customers to meet costs), few will be able to afford much more than basic necessities.
All of this is why it's important to know what your money is doing and where you are putting it to work. As explained recently, the only viable investments for the average middle class American today are cash, capital goods, and capital-producing goods such as food, fuel, seeds and tools of trade. All else is speculative and more than likely doomed. There are those who preach that gold will be the savior of assets and wealth, and that may be true, though most middle class people would more than likely have to sell any gold assets in order to meet day-to-day expenses in a post-crash economy.
In any case, there are trillions of dollars being fed into and out of the Wall Street stock machinery and today was a good day for them. Few of those who toil in the financial services industry have any idea of the train wreck that is just ahead, so, let their folly be your entertainment.
Dow 10,444.14, +47.38 (0.46%)
NASDAQ 2,292.31, +11.63 (0.51%)
S&P 500 1,122.97, +4.18 (0.37%)
NYSE Composite 7,173.07, +8.41 (0.12%)
Gainers outnumbered losers on the day, 3651-2790. There were 427 new highs to a paltry 27 new lows, as we approach the anniversary of the market bottom - March 9, 2009 - now just three trading days away.
NYSE Volume 4,448,901,500
NASDAQ Volume 2,062,605,875
Commodities took a bit of a breather. Oil was actually down 25 cents, to $80.62. Gold slipped $9.60, to $1,133.70, while silver fell 10 cents, to $17.23.
Tomorrow's release of non-farm payroll data for February probably won't cause much of a ruffle since expectations have been sufficiently dampened all week. It's a near certainty that the numbers will be worse than last month, and consequently blamed on the weather.
Markets and what passes for economic understanding have reached a new low, now that we can blame Mother Nature for our economic shortcomings.
All of the major indices are poised to post their third weekly gain in the last four and, as of today's close, all but the NYSE Composite are positive for the year.
Data which has been released this week has been mixed, though slightly positive overall. Initial unemployment claims dropped off by 29,000 in the most recent week, but are still stubbornly high at 469,000. A number closer to 300,000 would be indicative that layoffs have stopped and that re-hiring was about to resume, though market participants aren't holding their collective breaths in anticipation of that number. Factory orders showed an impressive 1.7% gain in January, following a solid 1.5% advance in December.
The canary in the coal mine, however, continued to be housing. Pending home sales fell 7.6% in January according to the National Association of Realtors (NAR), which, to almost nobody's surprise, was blamed on the weather, even though the worst storms of the season came in February, not January. Thus, any attempts to paint lipstick on the pig that is residential housing are likely to induce ridicule and groaning.
With the nation almost completely mortgaged to the government due to guarantees by Fannie Mae, Freddie Mac and the other alphabet soup names of agencies sopping up the upside-down mortgage market, there is little hope that the heartland of America's middle class is going to rebound any time soon. Jobs and housing continue to haunt the best efforts of government and financiers, like Freddie Kruger, who just seems to never go away for good.
While Wall Street can whoop it up over earnings and percentages, most of America is suffering, especially state governments. Roughly 4 out of 5 are going to need further assistance from the feds in closing gaping budget shortfalls this year, after being bailed out in 2009. Turning the sublime into the ridiculous, the federal government is about as bankrupt as most of Bernie Madoff's investors, so that, in effect, the states are borrowing borrowed money.
We have come to the point in our history that the obvious cannot be overlooked, though the media and government officials try their best to obfuscate the truth in hopes of retaining or gaining office. Adding together all of the debt - most of it piled on in recent years - and including the unfunded and underfunded mandates such as Medicare and Social Security, every American living today is in hock to the tune of about $430,000.
Any economist who tells you that the money will be paid back is simply a jack-ass lacking common sense. The incredible tax burden needed to hoist such a huge burden off the backs of American citizens would relegate today's and future wage-earners to a level usually reserved for indentured servants. Some make the case that due to the high tax burden already imposed, most Americans are nothing more than wage slaves already, a point that cannot be made too finely nor too bluntly.
While the mechanics of the economy whirr ever onward, the plight of the individual continues to deteriorate. Pay raises, once a commonplace theme in most business environments, have been all but obliterated since the late 1990s, except, of course, in government positions, where financial discipline has been abrogated and handed over to the debt-runners in congress and the presidency. The lower classes get welfare checks and other comforts from the largess of the Treasury; the upper class needs no such relief, having written all they need into the tax codes, leaving the vast middle class in a squeezed situation such as today's, where wages hardly cover the costs associated with common living.
Saving, that relic from the past that our parents and grandparents tried to imbue into us, has been replaced by debt, and that debt has exploded to unreasonable levels in just the past twenty years, threatening to destroy the entire fabric the social compact upon which our country was founded and currently operates.
Retirement, the biggest sham ever invented, is going to be thrust from the American lexicon within the next decade as baby-boom generation workers begin to add to the debt burden in increasing numbers. Taking away benefits from earners is still taboo in Washington, DC, though the decision to either cut benefits or raise taxes will soon be an unavoidable choice, probably within five to six years, if the union lasts that long.
The final insult to the idealist "peace and love" crowd from the 60s will be termination of Social Security for all intents and purposes. Benefits will still be doled out in some form or another, though the level of payments will be ludicrously low in comparison to what previous generations took out. Like all other social entitlement programs, Social Security and Medicare in particular are nothing more than vast Ponzi schemes, using current revenue to pay current beneficiaries. Within years, even possibly months, the balance will tip toward the recipients outnumbering the payers, sending the entire system further into default (It's already over the brink, though nobody will admit it).
What happens when the economy of a nation, brought down by debt burdens too weighty to maintain, implodes, is not a secret. The obvious first victims will be the lame and indigent, as government stipends are reduced or completely shut off. Next would be the chronically poor and illiterate, who do not possess enough brain power or initiative to fend for themselves.
The upper class will feel only slight pain, most of the anguish being sustained by the 60-70% of the population in the middle. Good jobs will be hard to come by, families will be forced to live together as in the Great Depression of the 1930s, and, though prices for everything from food to fuel will be forced lower (though that's arguable in the case of utilities and health care, which will raise prices on fewer customers to meet costs), few will be able to afford much more than basic necessities.
All of this is why it's important to know what your money is doing and where you are putting it to work. As explained recently, the only viable investments for the average middle class American today are cash, capital goods, and capital-producing goods such as food, fuel, seeds and tools of trade. All else is speculative and more than likely doomed. There are those who preach that gold will be the savior of assets and wealth, and that may be true, though most middle class people would more than likely have to sell any gold assets in order to meet day-to-day expenses in a post-crash economy.
In any case, there are trillions of dollars being fed into and out of the Wall Street stock machinery and today was a good day for them. Few of those who toil in the financial services industry have any idea of the train wreck that is just ahead, so, let their folly be your entertainment.
Dow 10,444.14, +47.38 (0.46%)
NASDAQ 2,292.31, +11.63 (0.51%)
S&P 500 1,122.97, +4.18 (0.37%)
NYSE Composite 7,173.07, +8.41 (0.12%)
Gainers outnumbered losers on the day, 3651-2790. There were 427 new highs to a paltry 27 new lows, as we approach the anniversary of the market bottom - March 9, 2009 - now just three trading days away.
NYSE Volume 4,448,901,500
NASDAQ Volume 2,062,605,875
Commodities took a bit of a breather. Oil was actually down 25 cents, to $80.62. Gold slipped $9.60, to $1,133.70, while silver fell 10 cents, to $17.23.
Tomorrow's release of non-farm payroll data for February probably won't cause much of a ruffle since expectations have been sufficiently dampened all week. It's a near certainty that the numbers will be worse than last month, and consequently blamed on the weather.
Markets and what passes for economic understanding have reached a new low, now that we can blame Mother Nature for our economic shortcomings.
Wednesday, February 3, 2010
Signs of Stupidity, Deflation and Depression
We've all heard about how Ben Bernanke, Tim Geithner and Hank Paulson saved the world from imminent financial collapse. Oddly enough, there was a Time Magazine cover story from 1999 about a similar trio of swashbuckling economists - Alan Greenspan, Robert Rubin and Lawrence Summers - who were then called the "Committee to Save the World."
Hmmm... 1999. Do we all remember what happened after this bunch - as Time loudly proclaimed on their cover - prevented a global economic meltdown?
What are we, stupid? I guess so. How is it that just 10 years ago we hailed the Fed Chairman and two Treasury Secretaries as "saviors" just before the whole country went kaput, and are doing the exact same thing again right now? Americans, and probably the majority of the world's population has the word "STUPID" printed on their foreheads in invisible ink which only economists can see through the aid of their special contact lenses and eyeglasses. Thus, their ability to hoodwink us into trusting them and then to hail them as heroes is entirely of our own making. We are their enablers.
So, don't blame them for the problems we face. Blame yourself. Did you take out too many loans? Did you overspend? Did you run up non-payable credit card debt? Did you not save a nickel during all those "boom" years, first in the 90s and more recently, from 2003-2008?
Go ahead and cry, it's OK. I did it too. But, there's a happy ending to this story. Well, maybe not exactly "happy," but maybe not tragic either. Now that we're all broke and penniless, or soon to be so, we're all in it together, down here scratching for scraps of food and any kind of work. An old adage suggests that "misery loves company," and in this instance, it could not ring more truly. With the accumulated debt of the nation approaching $13 trillion (not including $4 trillion from Fannie Mae and Freddie Mac, or about $59 trillion from unfunded Social Security, Medicare or federal retirement benefits - or is it $107 trillion?), millions of our countrymen and women out of work, foreclosures continuing to rise and a federal government bent on nationalizing everything from banks to car manufacturing to health care, bells and buzzers should be going off all over the place, yet we, yes, we dopes with STUPID surreptitiously stamped upon our foreheads, continue to work and spend and pay and worry and buy and pay, invest and lose, leaving our money in the same hands of the same greedy bankers who took us down this path to ruin.
We all deserve to be lined up and summarily executed, along with the congress and every member of the administration (people we voted into office). That would leave just little kids with no understanding of debt, the ultimate solution. I pray that my little tirade of sarcasm hasn't scared you into thinking it might just turn out that way. It might. It shouldn't, but to think that the people we call our heroes, but are actually a lying bunch of hoodlums, scoundrels and crooks, would be plotting the decimation of the world's finest democracy doesn't take much of a stretch of credulity.
There are things you and I can do before the situation gets much worse. I'll be discussing them in future posts as we wend our way through this sad, messy chapter of American history. But, just for starters, two things that won't work are: 1. leaving the country; 2. Staying put in a job you hate that doesn't pay you what you're worth.
The first doesn't work because other countries are in just as bad, if not worse, conditions than ours, and the second doesn't make any sense, right from Jump Street. Why anyone would want to waste their time on the planet toiling for people they don't like in a job they hate is beyond me. It sounds so masochistic. For a real solution, try watching the movie "Fight Club" until you either puke from disgust or actually come to an understanding of the deeper, hidden message in that film. Or, if you just need a good regurgitation, read Camus' "Nausea." I've heard it's even better in French.
As for the markets, the place people go when they wish to flush money away, stocks were generally weak and going nowhere. The daily movements of the stock market really don't stack up to a hill of fried chicken anymore, so thick is the distrust of counter-parties. Nobody really wants to be left holding the bag, and some estimates suggest that 40% of all trading is done by insiders, with insiders, and most of them work at Goldman Sachs. Funny, they say the same thing about betting on horses. 40% of all the action is carried out by owners, trainers, jockeys, grooms and even stewards. So, how are you supposed to win at that game? You're not. Get it?
Dow 10,270.55, -26.30 (0.26%)
NASDAQ 2,190.91, +0.85 (0.04%)
S&P 500 1,097.28, -6.04 (0.55%)
NYSE Composite 7,042.62, -58.82 (0.83%)
Losers beat gainers, 3910-2504. New highs beat new lows, 172-57, mostly due to the fact that at this time last year, stocks were falling faster than meteors from 13 miles above ground. Volume? Well, it absolutely sucked, just as it has for most of this miracle rally period since last March. With insiders trading mostly with insiders, what do you expect? There are fewer and fewer people willing to put money at risk every day. If you ave a 401k or other retirement plan, they're playing with your money, too. Isn't that a thought that makes you sleep well at night? If you're getting the idea that I'm just a little bit soured on the stock market and the general economy, you're beginning to get the message. However, unlike you, I'm fighting back. I've done some things to protect myself and eventually prosper from the obvious deflation that's been in place since the latter months of 2007.
NYSE Volume 4,917,465,000
NASDAQ Volume 2,341,595,500
Commodities were also weak. Oil, gold and silver were all lower. All the quotes I'm getting are different, depending on the source, so, for now, I'm not quoting specific prices, which is just what the market makers want: confusion. Haven't you ever wondered why currencies are so difficult to figure? The quotes most commonly used are Dollar:Yen, Euro:Dollar, Pound:Dollar. The Euro and Pound prices are inverted from the Yen, making comparisons and the real value of the dollar difficult, if not impossible, to decipher. It's a very confusing breakdown, but nobody cares to fix it? Why? Because it is confusing. Precisely.
According to Robert Prechter of the Elliott Wave, "a deflationary crash is characterized in part by a persistent, sustained, deep, general decline in people's desire and ability to lend and borrow. A depression is characterized in part by a persistent, sustained, deep general decline in production." (Conquer the Crash, Chapter 9)
Both of those conditions have been in place and at work since August, 2007. Efforts by the Fed, Treasury and the brilliant geniuses who troll Wall Street looking for suckers with money to forestall the inevitable have only lengthened the duration of the decline, then and now. Conditions seem to change with each month, quarter, economic or jobs report, but not much. Government statistics are so mangled that they no longer make sense or can be used as a true yardstick of economic vitality or disease.
We are in the throes of the worst depression the country has ever seen, kept afloat by federal payments to states, states to cites and so on, and by unemployment benefits, medicare transfers, retirement benefits, Social Security payments, and other seamless, unseen transfers of money like TARP, TALF, HAMP and other Federal Reserve machinations. Unemployment keeps rising, people keep losing their homes and most of us just go about their business as if things were normal.
Things are far from normal.
Hmmm... 1999. Do we all remember what happened after this bunch - as Time loudly proclaimed on their cover - prevented a global economic meltdown?
What are we, stupid? I guess so. How is it that just 10 years ago we hailed the Fed Chairman and two Treasury Secretaries as "saviors" just before the whole country went kaput, and are doing the exact same thing again right now? Americans, and probably the majority of the world's population has the word "STUPID" printed on their foreheads in invisible ink which only economists can see through the aid of their special contact lenses and eyeglasses. Thus, their ability to hoodwink us into trusting them and then to hail them as heroes is entirely of our own making. We are their enablers.
So, don't blame them for the problems we face. Blame yourself. Did you take out too many loans? Did you overspend? Did you run up non-payable credit card debt? Did you not save a nickel during all those "boom" years, first in the 90s and more recently, from 2003-2008?
Go ahead and cry, it's OK. I did it too. But, there's a happy ending to this story. Well, maybe not exactly "happy," but maybe not tragic either. Now that we're all broke and penniless, or soon to be so, we're all in it together, down here scratching for scraps of food and any kind of work. An old adage suggests that "misery loves company," and in this instance, it could not ring more truly. With the accumulated debt of the nation approaching $13 trillion (not including $4 trillion from Fannie Mae and Freddie Mac, or about $59 trillion from unfunded Social Security, Medicare or federal retirement benefits - or is it $107 trillion?), millions of our countrymen and women out of work, foreclosures continuing to rise and a federal government bent on nationalizing everything from banks to car manufacturing to health care, bells and buzzers should be going off all over the place, yet we, yes, we dopes with STUPID surreptitiously stamped upon our foreheads, continue to work and spend and pay and worry and buy and pay, invest and lose, leaving our money in the same hands of the same greedy bankers who took us down this path to ruin.
We all deserve to be lined up and summarily executed, along with the congress and every member of the administration (people we voted into office). That would leave just little kids with no understanding of debt, the ultimate solution. I pray that my little tirade of sarcasm hasn't scared you into thinking it might just turn out that way. It might. It shouldn't, but to think that the people we call our heroes, but are actually a lying bunch of hoodlums, scoundrels and crooks, would be plotting the decimation of the world's finest democracy doesn't take much of a stretch of credulity.
There are things you and I can do before the situation gets much worse. I'll be discussing them in future posts as we wend our way through this sad, messy chapter of American history. But, just for starters, two things that won't work are: 1. leaving the country; 2. Staying put in a job you hate that doesn't pay you what you're worth.
The first doesn't work because other countries are in just as bad, if not worse, conditions than ours, and the second doesn't make any sense, right from Jump Street. Why anyone would want to waste their time on the planet toiling for people they don't like in a job they hate is beyond me. It sounds so masochistic. For a real solution, try watching the movie "Fight Club" until you either puke from disgust or actually come to an understanding of the deeper, hidden message in that film. Or, if you just need a good regurgitation, read Camus' "Nausea." I've heard it's even better in French.
As for the markets, the place people go when they wish to flush money away, stocks were generally weak and going nowhere. The daily movements of the stock market really don't stack up to a hill of fried chicken anymore, so thick is the distrust of counter-parties. Nobody really wants to be left holding the bag, and some estimates suggest that 40% of all trading is done by insiders, with insiders, and most of them work at Goldman Sachs. Funny, they say the same thing about betting on horses. 40% of all the action is carried out by owners, trainers, jockeys, grooms and even stewards. So, how are you supposed to win at that game? You're not. Get it?
Dow 10,270.55, -26.30 (0.26%)
NASDAQ 2,190.91, +0.85 (0.04%)
S&P 500 1,097.28, -6.04 (0.55%)
NYSE Composite 7,042.62, -58.82 (0.83%)
Losers beat gainers, 3910-2504. New highs beat new lows, 172-57, mostly due to the fact that at this time last year, stocks were falling faster than meteors from 13 miles above ground. Volume? Well, it absolutely sucked, just as it has for most of this miracle rally period since last March. With insiders trading mostly with insiders, what do you expect? There are fewer and fewer people willing to put money at risk every day. If you ave a 401k or other retirement plan, they're playing with your money, too. Isn't that a thought that makes you sleep well at night? If you're getting the idea that I'm just a little bit soured on the stock market and the general economy, you're beginning to get the message. However, unlike you, I'm fighting back. I've done some things to protect myself and eventually prosper from the obvious deflation that's been in place since the latter months of 2007.
NYSE Volume 4,917,465,000
NASDAQ Volume 2,341,595,500
Commodities were also weak. Oil, gold and silver were all lower. All the quotes I'm getting are different, depending on the source, so, for now, I'm not quoting specific prices, which is just what the market makers want: confusion. Haven't you ever wondered why currencies are so difficult to figure? The quotes most commonly used are Dollar:Yen, Euro:Dollar, Pound:Dollar. The Euro and Pound prices are inverted from the Yen, making comparisons and the real value of the dollar difficult, if not impossible, to decipher. It's a very confusing breakdown, but nobody cares to fix it? Why? Because it is confusing. Precisely.
According to Robert Prechter of the Elliott Wave, "a deflationary crash is characterized in part by a persistent, sustained, deep, general decline in people's desire and ability to lend and borrow. A depression is characterized in part by a persistent, sustained, deep general decline in production." (Conquer the Crash, Chapter 9)
Both of those conditions have been in place and at work since August, 2007. Efforts by the Fed, Treasury and the brilliant geniuses who troll Wall Street looking for suckers with money to forestall the inevitable have only lengthened the duration of the decline, then and now. Conditions seem to change with each month, quarter, economic or jobs report, but not much. Government statistics are so mangled that they no longer make sense or can be used as a true yardstick of economic vitality or disease.
We are in the throes of the worst depression the country has ever seen, kept afloat by federal payments to states, states to cites and so on, and by unemployment benefits, medicare transfers, retirement benefits, Social Security payments, and other seamless, unseen transfers of money like TARP, TALF, HAMP and other Federal Reserve machinations. Unemployment keeps rising, people keep losing their homes and most of us just go about their business as if things were normal.
Things are far from normal.
Wednesday, April 29, 2009
Preparing For the Next Crash
One would have assumed that if 1st quarter GDP had come in worse than expected this morning - expectations were around -5%, the actual figure was -6.1% - that stocks would sell off.
One would have been wrong - very wrong - as the market merely shrugged off another indication that the recession was worsening and headed off to new heights. This makes trading stocks on fundamentals, or even economic conditions, not only difficult, but impossible. Every day there are new signs that the economy is mired in a negative-growth trench, yet stocks continue to rally, seemingly without end.
Today's activity was probably the most remarkable event of the past two months, noting the considerable obstacles to economic growth standing in the way, huge unemployment numbers, continued weakness in residential housing and now commercial real estate and the continuing saga of the spreading Swine Flu.
It was remarkable in that while stocks were poised to jump start at the open even before the 8:30 am release of 1st quarter GDP figures, but even more remarkable in that stock futures didn't even blink when it was revealed that actual GDP was falling at a faster rate than anticipated. One can only assume that insiders already knew the figures or had already decided the day's direction for stocks and would not be dissuaded regardless of reality. Had the actual NY stock exchange been blown to bits, traders would still have pushed stocks higher, such was the plan for the day.
It's a scam, a complete and total rigging by the controllers of the market and the country. In the end they will bankrupt all of us, but for now, they are in the business of pushing stock prices higher. It will not last. It cannot last. The fundamentals of the economy are entirely too weak to sustain stock valuations bordering on the absurd.
Making matters even more ridiculous, the Fed announced no change in interest rate policy - widely expected - but hinted that there were signs of "recovery" in the US economy. Though the press release announcing that the Federal Funds rate would remain between 0 and 0.25% (read: free money) was among the shortest on record, the following passage provided more insight than any other verbiage in the text:
Reading that sentence carefully, the Committee (FOMC: Federal Open Market Committee) is trying to avoid using the word "deflation," which is occurring across a wide swath of the economic landscape. They are also trying to rectify "inflation" and "price stability." In other words, the Fed isn't really promoting "price stability" as they are so chartered. They are hell-bent on inducing inflation, the very same inflation that has wrecked our economy for so many years, for as long as the Federal Reserve has operated as the nation's central bank there has been unstoppable, rampant inflation which has destroyed the value of the dollar and kept wages at poverty levels for a majority of the working population.
They simply cannot have inflation and price stability at the same time. The two are not polar opposites - inflation and deflation are - but price stability means equilibrium, a condition which spells death for the US economy, built on debt and tied inexorably to inflation and wealth destruction.
So, it is time to prepare for the next crash, which, in light of current economic policies of the Fed, is inevitable. The market's aberrant behavior is sending the strongest sell signal I've ever seen, violating all manner of resistance in charts and basic fundamental trading regimens.
It is time to unload all stocks, at once, because the retracement back to the March lows will commence shortly.
I wrote the above line at 3:03 pm EDT, after the Dow peaked at 8250 and was beginning to retreat. By the end of the day, the sell-off was in full bloom, just before last-minute buying punched stocks ahead right at the close (painting the tape).
Dow 8,185.73, +168.78 (2.11%)
NASDAQ 1,711.94, +38.13 (2.28%)
S&P 500 873.64, +18.48 (2.16%)
NYSE Composite 5,516.14, +146.29 (2.72%)
Just to illuminate my position that the recent advances in stock prices are unsustainable, below are some of the headlines for today, with links to the underlying articles:
CNN Money: Economy falls much more than expected
Associated Press: Jobless rates rise in all US metro areas in March
Reuters: U.S. to pay off mortgage investors
Do any of those headlines encourage you enough to go out and buy stocks? No? I didn't think so. The economy is sinking into a black hole, the United States is becoming even more of a welfare state than it already was and hope for lasting, robust recovery is nothing more than a fantasy. If you don't think so, I encourage you to read this exceptional article: Economic Obsolescence, by Andrew McKillop. Be forewarned. It is quite deep and lengthy, but filled with insights and observations you won't find on CNBC or any other fraudulent financial reporting service.
My message is simple. Wall Street, stocks, retirement plans, 401k plans and the like are a scam. You're better off investing in your own home, planting a garden, cutting your expenses and going back to a simpler lifestyle. However, depending upon where you live, you may need high walls and security devices to keep out intruders, because many of the people in the USA are going to face horrific economic conditions over the next 6-12 years. Six years of pain and no growth are in the cards at a minimum. Higher taxes, higher crime rates, rioting, corruption in government and an overwhelming debt burden on families and the government are inevitable. Bank failures have thus far been avoided only due to manipulation and intervention by the Fed and general obfuscation and outright lying by both the Treasury and the banksters (bank gangsters).
The longer we hand out money to the undeserving - be they banks or welfare recipients - the longer it will take and the harder it will be to restore any semblance of a functioning economy. Right now, the economy is on extended life support, but the patient, for all intents and purposes, is a vegetable, incapable of ever returning to a functional lifestyle. The government bailouts and stimulus plans, plus the heavy debt imposed by the upcoming federal budget, is tantamount to throwing money into a blazing bonfire. It will all go for naught, not for investment, and therefore will result in DEFLATION, not inflation, a point sorely missed by the ignorant morons at the Fed and at the top positions of government. Their actions are making the road to recovery longer and actually exacerbating the depth of the depression.
There is good news. The country formerly known as the land of the free and the home of the brave is now full of people living on government hand-outs, with steady incomes and no clue as to value. And don't believe that just welfare recipients - those with the plasma TVs, all the cable channels and usually a late-model car in the driveway - are alone in their status of money-takers. Add to it anybody on any government payroll anywhere: cops, teachers, mayors, social service workers; and retirees on military pensions, social security, what have you. There has never been a better time to screw people out of their money. The nation is full of dupes, dopes, pigeons and rubes, standing in line to be taken directly to the cleaners. That is the end result of the welfare state, where money is disrespected because it was not earned.
So, if you have an idea and some motivation, crooked or honest, you should do well. People just can't stop spending and the government is actually encouraging waste on a gigantic scale. The money is out there. You just need to go get it.
On the day, internals were mixed, though advancing issues outnumbered declining ones by a wide margin, 5233-1265. New highs came close to overtaking new lows, but failed with 93 new 52-week lows being reported to 55 new highs. Both numbers are elevated from previous readings but have not diverged significantly. They will - one way or the other - soon. A breakout or breakdown is overdue.
NYSE Volume 8,913,934,000
NASDAQ Volume 2,361,983,750
Commodities were mostly higher. Oil gained $1.05, to $50.80. Gold was up $6.90, to $900.50. Silver gained 35 cents, to $12.78. Pork bellies sold off, down $1.93, to $75.88 per pound, though live hog prices stabilized and were actually moderately higher.
Make no doubt about it. Today's late-day sell-off was just the opening salvo. Volume spiked incredibly after 2:30, when the Dow lost more than 100 points into the close. The selling will accelerate soon, maybe tomorrow, maybe Friday, maybe not even until next week, but it will come and it will be swift and severe. Count on it.
Keep an eye on the equally-bogus "swine flu pandemic" which will be blamed for the coming market downturn. More deaths will be caused by trying to prevent the disease - watch how Tamiflu and other medicines will be promoted - and the sure-to-come vaccine, than the disease itself, though the media will not report that fact.
One would have been wrong - very wrong - as the market merely shrugged off another indication that the recession was worsening and headed off to new heights. This makes trading stocks on fundamentals, or even economic conditions, not only difficult, but impossible. Every day there are new signs that the economy is mired in a negative-growth trench, yet stocks continue to rally, seemingly without end.
Today's activity was probably the most remarkable event of the past two months, noting the considerable obstacles to economic growth standing in the way, huge unemployment numbers, continued weakness in residential housing and now commercial real estate and the continuing saga of the spreading Swine Flu.
It was remarkable in that while stocks were poised to jump start at the open even before the 8:30 am release of 1st quarter GDP figures, but even more remarkable in that stock futures didn't even blink when it was revealed that actual GDP was falling at a faster rate than anticipated. One can only assume that insiders already knew the figures or had already decided the day's direction for stocks and would not be dissuaded regardless of reality. Had the actual NY stock exchange been blown to bits, traders would still have pushed stocks higher, such was the plan for the day.
It's a scam, a complete and total rigging by the controllers of the market and the country. In the end they will bankrupt all of us, but for now, they are in the business of pushing stock prices higher. It will not last. It cannot last. The fundamentals of the economy are entirely too weak to sustain stock valuations bordering on the absurd.
Making matters even more ridiculous, the Fed announced no change in interest rate policy - widely expected - but hinted that there were signs of "recovery" in the US economy. Though the press release announcing that the Federal Funds rate would remain between 0 and 0.25% (read: free money) was among the shortest on record, the following passage provided more insight than any other verbiage in the text:
"In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term."
Reading that sentence carefully, the Committee (FOMC: Federal Open Market Committee) is trying to avoid using the word "deflation," which is occurring across a wide swath of the economic landscape. They are also trying to rectify "inflation" and "price stability." In other words, the Fed isn't really promoting "price stability" as they are so chartered. They are hell-bent on inducing inflation, the very same inflation that has wrecked our economy for so many years, for as long as the Federal Reserve has operated as the nation's central bank there has been unstoppable, rampant inflation which has destroyed the value of the dollar and kept wages at poverty levels for a majority of the working population.
They simply cannot have inflation and price stability at the same time. The two are not polar opposites - inflation and deflation are - but price stability means equilibrium, a condition which spells death for the US economy, built on debt and tied inexorably to inflation and wealth destruction.
So, it is time to prepare for the next crash, which, in light of current economic policies of the Fed, is inevitable. The market's aberrant behavior is sending the strongest sell signal I've ever seen, violating all manner of resistance in charts and basic fundamental trading regimens.
It is time to unload all stocks, at once, because the retracement back to the March lows will commence shortly.
I wrote the above line at 3:03 pm EDT, after the Dow peaked at 8250 and was beginning to retreat. By the end of the day, the sell-off was in full bloom, just before last-minute buying punched stocks ahead right at the close (painting the tape).
Dow 8,185.73, +168.78 (2.11%)
NASDAQ 1,711.94, +38.13 (2.28%)
S&P 500 873.64, +18.48 (2.16%)
NYSE Composite 5,516.14, +146.29 (2.72%)
Just to illuminate my position that the recent advances in stock prices are unsustainable, below are some of the headlines for today, with links to the underlying articles:
CNN Money: Economy falls much more than expected
Associated Press: Jobless rates rise in all US metro areas in March
Reuters: U.S. to pay off mortgage investors
Do any of those headlines encourage you enough to go out and buy stocks? No? I didn't think so. The economy is sinking into a black hole, the United States is becoming even more of a welfare state than it already was and hope for lasting, robust recovery is nothing more than a fantasy. If you don't think so, I encourage you to read this exceptional article: Economic Obsolescence, by Andrew McKillop. Be forewarned. It is quite deep and lengthy, but filled with insights and observations you won't find on CNBC or any other fraudulent financial reporting service.
My message is simple. Wall Street, stocks, retirement plans, 401k plans and the like are a scam. You're better off investing in your own home, planting a garden, cutting your expenses and going back to a simpler lifestyle. However, depending upon where you live, you may need high walls and security devices to keep out intruders, because many of the people in the USA are going to face horrific economic conditions over the next 6-12 years. Six years of pain and no growth are in the cards at a minimum. Higher taxes, higher crime rates, rioting, corruption in government and an overwhelming debt burden on families and the government are inevitable. Bank failures have thus far been avoided only due to manipulation and intervention by the Fed and general obfuscation and outright lying by both the Treasury and the banksters (bank gangsters).
The longer we hand out money to the undeserving - be they banks or welfare recipients - the longer it will take and the harder it will be to restore any semblance of a functioning economy. Right now, the economy is on extended life support, but the patient, for all intents and purposes, is a vegetable, incapable of ever returning to a functional lifestyle. The government bailouts and stimulus plans, plus the heavy debt imposed by the upcoming federal budget, is tantamount to throwing money into a blazing bonfire. It will all go for naught, not for investment, and therefore will result in DEFLATION, not inflation, a point sorely missed by the ignorant morons at the Fed and at the top positions of government. Their actions are making the road to recovery longer and actually exacerbating the depth of the depression.
There is good news. The country formerly known as the land of the free and the home of the brave is now full of people living on government hand-outs, with steady incomes and no clue as to value. And don't believe that just welfare recipients - those with the plasma TVs, all the cable channels and usually a late-model car in the driveway - are alone in their status of money-takers. Add to it anybody on any government payroll anywhere: cops, teachers, mayors, social service workers; and retirees on military pensions, social security, what have you. There has never been a better time to screw people out of their money. The nation is full of dupes, dopes, pigeons and rubes, standing in line to be taken directly to the cleaners. That is the end result of the welfare state, where money is disrespected because it was not earned.
So, if you have an idea and some motivation, crooked or honest, you should do well. People just can't stop spending and the government is actually encouraging waste on a gigantic scale. The money is out there. You just need to go get it.
On the day, internals were mixed, though advancing issues outnumbered declining ones by a wide margin, 5233-1265. New highs came close to overtaking new lows, but failed with 93 new 52-week lows being reported to 55 new highs. Both numbers are elevated from previous readings but have not diverged significantly. They will - one way or the other - soon. A breakout or breakdown is overdue.
NYSE Volume 8,913,934,000
NASDAQ Volume 2,361,983,750
Commodities were mostly higher. Oil gained $1.05, to $50.80. Gold was up $6.90, to $900.50. Silver gained 35 cents, to $12.78. Pork bellies sold off, down $1.93, to $75.88 per pound, though live hog prices stabilized and were actually moderately higher.
Make no doubt about it. Today's late-day sell-off was just the opening salvo. Volume spiked incredibly after 2:30, when the Dow lost more than 100 points into the close. The selling will accelerate soon, maybe tomorrow, maybe Friday, maybe not even until next week, but it will come and it will be swift and severe. Count on it.
Keep an eye on the equally-bogus "swine flu pandemic" which will be blamed for the coming market downturn. More deaths will be caused by trying to prevent the disease - watch how Tamiflu and other medicines will be promoted - and the sure-to-come vaccine, than the disease itself, though the media will not report that fact.
Monday, March 2, 2009
Deflation, Depression Drumbeat
Everybody Limbo! How low can she go?
Today's closing numbers, seen below, are close to those levels, so the financial news junkies will be saying the stocks fell to their lowest levels since 1997, or the worst in 12 years.
Dow 6,763.29, -299.64 (4.24%)
NASDAQ 1,322.85, -54.99 (3.99%)
S&P 500 700.82, -34.27 (4.66%)
NYSE Composite 4,360.99, -256.04 (5.55%)
These kinds of comparisons serve almost no useful purpose, except to jangle our memories to recall what life was like back then. Here's an idea. Tiger Woods was in his first year as a professional golfer. Since then, Tiger's done well by simply plying his craft and parlaying his popularity into lucrative endorsement deals.
The point is that investing - especially in times like these - is not for everyone, while working hard and seizing the financial opportunities that may present themselves is probably a more fundamentally sound plan. Saving 10% of your income doesn't hurt either.
What is more useful is looking at the relative price/earnings ratios and dividend yields during boom and bust periods. Conventional wisdom dictates that stocks are risky when p/e ratios are above the 12-15 range and good buys when they are 5-10. The bottom comes when these ratios reach a cumulative 5-7. They are currently around 8-10, so the bottom is close at hand, numbers-wise.
As for dividend yields, a 7% compounded return doubles your money in 10 years, but with interest rates running at or close to historic lows, anything over 7% should be viewed with some degree of skepticism. Either the underlying stock is still falling or the dividend may, at some point in the not-so-distant future, be cut.
Either case will dampen your overall return, so stocks which are paying a dividend yield around 3-5% are likely to be good bets. Their price may improve (or not fall much more) and their dividends are likely to remain intact.
While I think it is still too early to call a bottom of any sort or time period, I am on record for calling the bottom at Dow 5267 sometime later this year, probably between August and November. Noting that, I may be completely wrong. We may be only at the beginning of a period of prolonged economic distress, in other words, a Depression-like decline.
Some are calling for the Dow to fall to 4000, others, below that. Remember that during the Great Depression, which lasted anywhere from 8 to 10 years, from 1929 to 1938, stocks lost 90% of their value. The very worst years of the depression, from a day-to-day "life sucks" standpoint, was from 1931 to 1935, when unemployment peaked and remained high and death, disease and rampant poverty was the order of the day.
Back in the 30s, people starved, froze to death, and suffered from a wide assortment of maladies many of which today have been eradicated by modern medicine. Considering the dynamic economy in which we live and the incredible amount of government aid available, it seems unlikely that many today will stave or freeze, though many will die of heat stroke, especially the elderly who try to save on cooling costs by turning their air conditioning off during the summer.
While I continue daily to paint this "doom and gloom" scenario, be reminded that today's calamity was caused by just one more market event - AIG's announced $61 billion loss in the last quarter and the government throwing another $30 billion at the company. Somebody please tell me how any company can lose $61 billion in 3 months time. On one hand, it's ludicrous and without precedent. On the other hand, how much of these "losses" are merely papering over a bottomless pit of credit default swaps and other cross-party derivatives.
AIG was the king of insurance and the leader in CDS, which are essentially insurance against bond defaults. With defaults still at inordinately-high levels (and growing, according to some), AIG doesn't have to funds to cover their own bad paper. AIG is no sideshow to the banking crisis, it is at the heart of the crisis.
Until AIG's problems are solved, or until the government comes up with a better idea than to just continue pumping good money down a sinkhole, nothing will change. Wall Street banks and AIG blew up the world financial system and there needs to be a fundamental shift in how the system works. Investigations of the CEOs and other executives at the tops of the firms are necessary, and they should lead to prosecutions and jail for the perpetrators, many of them household names by now.
The point is that bad news continues, unabated, nearly every day. This week will be no different. Tuesday, auto and truck sales for February; Wednesday, private job loss numbers are released by ADP; Thursday, new unemployment claims; Friday, Labor Department's Non-Farm Payrolls. All of the figures are predicted to be dire, so any hope for a rally needs to be moved back a few weeks, or months, or years.
On the day, one of the most one-sided ever witnessed, declining issues beat advancers by a stunning 9-1 ratio, 6036-675. New lows danced on the graves of new highs, 1479-11. Volume was again very high, as investors scramble to get out of way of the rampaging avalanche of burning paper holdings.
NYSE Volume 1,967,912,000
NASDAQ Volume 2,336,813,000
Not a single Dow component registered a gain. The worst were Citigroup (C) 1.30, -0.20, -20.00%; General Electric (GE) 7.60, -0.91, -10.61%; Alcoa (AA) 5.49, -0.74, -11.88%; General Motors (GM) 2.01, -0.24 -10.67; American Express (AXP) 11.06, -1.00, -8.29; Caterpillar 22.17, -2.44, -9.91% and Bank of America (BAC) 3.63, -0.23, -8.10.
Commodities exhibited all the symptoms of a deflationary spiral. There was no one single commodity higher on the day. From natural gas to coffee to feeder cattle, everything was down. Oil got hammered on persistent demand concerns, down $4.61, to $40.15. The precious metals fared better than most, but still, gold lost $2.50, to $940.00. Silver lost just 2 cents, to $13.07.
Today was one of the most disheartening in a series of such. Nothing, not the government, nor Warren Buffett, nor Barack Obama, nor the Fed can stop the freight train of deflation, wealth destruction and decline.
We might as well accept the facts: We are already in a depression. We are beyond the state of denial. No investment is safe.
- On April 28, 1997, the Dow closed at 6783.02
- November 1, 1996, the S&P closed at 703.77
- The NYSE Composite closed at 4378.48 on February 11, 1997
- The NASDAQ is still above its November 20, 2008 close at 1313, so, after that, the next closing low will be May 2, 1997, at 1305.33
Today's closing numbers, seen below, are close to those levels, so the financial news junkies will be saying the stocks fell to their lowest levels since 1997, or the worst in 12 years.
Dow 6,763.29, -299.64 (4.24%)
NASDAQ 1,322.85, -54.99 (3.99%)
S&P 500 700.82, -34.27 (4.66%)
NYSE Composite 4,360.99, -256.04 (5.55%)
These kinds of comparisons serve almost no useful purpose, except to jangle our memories to recall what life was like back then. Here's an idea. Tiger Woods was in his first year as a professional golfer. Since then, Tiger's done well by simply plying his craft and parlaying his popularity into lucrative endorsement deals.
The point is that investing - especially in times like these - is not for everyone, while working hard and seizing the financial opportunities that may present themselves is probably a more fundamentally sound plan. Saving 10% of your income doesn't hurt either.
What is more useful is looking at the relative price/earnings ratios and dividend yields during boom and bust periods. Conventional wisdom dictates that stocks are risky when p/e ratios are above the 12-15 range and good buys when they are 5-10. The bottom comes when these ratios reach a cumulative 5-7. They are currently around 8-10, so the bottom is close at hand, numbers-wise.
As for dividend yields, a 7% compounded return doubles your money in 10 years, but with interest rates running at or close to historic lows, anything over 7% should be viewed with some degree of skepticism. Either the underlying stock is still falling or the dividend may, at some point in the not-so-distant future, be cut.
Either case will dampen your overall return, so stocks which are paying a dividend yield around 3-5% are likely to be good bets. Their price may improve (or not fall much more) and their dividends are likely to remain intact.
While I think it is still too early to call a bottom of any sort or time period, I am on record for calling the bottom at Dow 5267 sometime later this year, probably between August and November. Noting that, I may be completely wrong. We may be only at the beginning of a period of prolonged economic distress, in other words, a Depression-like decline.
Some are calling for the Dow to fall to 4000, others, below that. Remember that during the Great Depression, which lasted anywhere from 8 to 10 years, from 1929 to 1938, stocks lost 90% of their value. The very worst years of the depression, from a day-to-day "life sucks" standpoint, was from 1931 to 1935, when unemployment peaked and remained high and death, disease and rampant poverty was the order of the day.
Back in the 30s, people starved, froze to death, and suffered from a wide assortment of maladies many of which today have been eradicated by modern medicine. Considering the dynamic economy in which we live and the incredible amount of government aid available, it seems unlikely that many today will stave or freeze, though many will die of heat stroke, especially the elderly who try to save on cooling costs by turning their air conditioning off during the summer.
While I continue daily to paint this "doom and gloom" scenario, be reminded that today's calamity was caused by just one more market event - AIG's announced $61 billion loss in the last quarter and the government throwing another $30 billion at the company. Somebody please tell me how any company can lose $61 billion in 3 months time. On one hand, it's ludicrous and without precedent. On the other hand, how much of these "losses" are merely papering over a bottomless pit of credit default swaps and other cross-party derivatives.
AIG was the king of insurance and the leader in CDS, which are essentially insurance against bond defaults. With defaults still at inordinately-high levels (and growing, according to some), AIG doesn't have to funds to cover their own bad paper. AIG is no sideshow to the banking crisis, it is at the heart of the crisis.
Until AIG's problems are solved, or until the government comes up with a better idea than to just continue pumping good money down a sinkhole, nothing will change. Wall Street banks and AIG blew up the world financial system and there needs to be a fundamental shift in how the system works. Investigations of the CEOs and other executives at the tops of the firms are necessary, and they should lead to prosecutions and jail for the perpetrators, many of them household names by now.
The point is that bad news continues, unabated, nearly every day. This week will be no different. Tuesday, auto and truck sales for February; Wednesday, private job loss numbers are released by ADP; Thursday, new unemployment claims; Friday, Labor Department's Non-Farm Payrolls. All of the figures are predicted to be dire, so any hope for a rally needs to be moved back a few weeks, or months, or years.
On the day, one of the most one-sided ever witnessed, declining issues beat advancers by a stunning 9-1 ratio, 6036-675. New lows danced on the graves of new highs, 1479-11. Volume was again very high, as investors scramble to get out of way of the rampaging avalanche of burning paper holdings.
NYSE Volume 1,967,912,000
NASDAQ Volume 2,336,813,000
Not a single Dow component registered a gain. The worst were Citigroup (C) 1.30, -0.20, -20.00%; General Electric (GE) 7.60, -0.91, -10.61%; Alcoa (AA) 5.49, -0.74, -11.88%; General Motors (GM) 2.01, -0.24 -10.67; American Express (AXP) 11.06, -1.00, -8.29; Caterpillar 22.17, -2.44, -9.91% and Bank of America (BAC) 3.63, -0.23, -8.10.
Commodities exhibited all the symptoms of a deflationary spiral. There was no one single commodity higher on the day. From natural gas to coffee to feeder cattle, everything was down. Oil got hammered on persistent demand concerns, down $4.61, to $40.15. The precious metals fared better than most, but still, gold lost $2.50, to $940.00. Silver lost just 2 cents, to $13.07.
Today was one of the most disheartening in a series of such. Nothing, not the government, nor Warren Buffett, nor Barack Obama, nor the Fed can stop the freight train of deflation, wealth destruction and decline.
We might as well accept the facts: We are already in a depression. We are beyond the state of denial. No investment is safe.
Monday, January 21, 2008
Stocks Tank Worldwide. Is This the Big One?
Are we setting up for The Big One?
While America was taking the day off in honor of Martin Luther King, Jr., one of our nation's greatest defenders of liberty, equality and justice, markets around the world were crashing from the after effects of the credit crisis and now the looming confidence crisis in the USA.
This article tells most of the story, but the reality won't hit the US shores for another 12 hours. By the time US equity markets open, the Asian markets will have gone through another day and Europe's will be well into their afternoon sessions.
Some of the drops on Monday were shocking:
Britain's FTSE-100 -5.5%
France's CAC-40 -6.8%
Germany's DAX 30 -7.2.
Hong Kong's Hang Seng -5.5%
The meaning in all of this for US stocks is disturbingly real, since all of the declines worldwide are keyed to the fear of a US recession. As the so-called buyer of last resort, the US bears the blame and also will likely suffer consequences equal or worse than those of our fellow capital-intensive countries. After all, the recession is going to happen here first.
Shades of the Great Depression
While the actual causes of the Great Depression are still the focus of argument among economists, what remains clear is that most of the world was plunged into an economic abyss after the market crash in 1929.
Where this is all headed is in the wrong direction. Using Fibonacci calculations of 33, 50 and 67% declines from the previous gain (roughly 6800 points), the declines would be of the order of 2244, 3200 and 4690 points on the Dow.
With the Dow already close to that 2244-point decline, I had expected a bounce and the gains on Friday morning might have been all there was. That makes the next stop around 11,000, and if that breaks down, somewhere around 9500 may be the bottom.
It could get worse, however, if, as anyone paying attention might recall, the stock market began its tremendous bull run at the start of the Iraq War in March of 2003. Considering the massive fiasco that campaign has devolved into, might there be some coupling of the market gains to the war "effort" and if so, what have we wrought but death, destruction and about a trillion dollars in wasted spending?
The last 4 1/2 years of "prosperity" might have been an illusion. If that's the case, we're in for some hard times indeed.
If the Dow drops below 9500 and begins to head for the 7500-8000 area, it could portend catastrophe, not only for the stock market but for the US and possibly all other economies.
Now, world reaction to the US government's plan has been met with skepticism if not outright disapproval. Since investors and economists are generally better-equipped than government bureaucrats and politicians to read the "tea leaves" correctly, the instinctive selling by the cognoscente may have already begun. As usual, the really smart money has gotten out of the way earliest.
We may be in the earliest stages of a cataclysmic economic event. Remember, during the Great Depression we had the relative security of the gold standard. Such a limiting mechanism no longer exists in the leveraged world of floating currencies.
If we are indeed going to hell in a handbasket, the signs should be easy to discern and some have already appeared: inept politicians, secrecy and distrust within the banking community, a continuing decline in stocks with only brief respites, falling prices, falling currencies, disruptions in trade and commerce, business failures, bankruptcies, municipal budget pressures, massive real estate foreclosures from delinquencies on mortgages or taxes or both.
Inflation may turn out to be the least of our worries. The temporary advance in prices may turn out to be chimeric as the real devastation of slack demand takes hold in coming months. Inflation can be beaten back. A cyclical deflationary spiral is a demon for which nobody is prepared to confront, but we're fortunately not there yet.
A couple of months ago, I mentioned that some people might consider cashing out their IRA or retirement funds, even if it meant losing 20% of the portfolio's value as a penalty. Today, that almost looks like sound advice, especially if you're invested in an indexed fund. Since August or October, you may already be down close to that 20%. Wouldn't you rather have whatever's left in your control, rather than that of a fund manager who is likely to be chasing profits where none exist?
I am not a pessimist. I am a realist and I only present the views as a cautionary tale. If the worst is yet to come and the economic reality is more severe than most of us wish to imagine, it's far better to be forewarned than caught in the snare of an economy biting the dust.
Is sure hope my father reads this. Despite my constant warnings, he continues to play the market long and loses. I fear for his economic fate, but more for the welfare of those under 18 who don't already have a place at the table, but will be picking up the scraps.
While America was taking the day off in honor of Martin Luther King, Jr., one of our nation's greatest defenders of liberty, equality and justice, markets around the world were crashing from the after effects of the credit crisis and now the looming confidence crisis in the USA.
This article tells most of the story, but the reality won't hit the US shores for another 12 hours. By the time US equity markets open, the Asian markets will have gone through another day and Europe's will be well into their afternoon sessions.
Some of the drops on Monday were shocking:
Britain's FTSE-100 -5.5%
France's CAC-40 -6.8%
Germany's DAX 30 -7.2.
Hong Kong's Hang Seng -5.5%
The meaning in all of this for US stocks is disturbingly real, since all of the declines worldwide are keyed to the fear of a US recession. As the so-called buyer of last resort, the US bears the blame and also will likely suffer consequences equal or worse than those of our fellow capital-intensive countries. After all, the recession is going to happen here first.
Shades of the Great Depression
While the actual causes of the Great Depression are still the focus of argument among economists, what remains clear is that most of the world was plunged into an economic abyss after the market crash in 1929.
Huge Profits in Options
Stocks go up and down. Make money in both directions with exclusive options advisor.
dtmagazine.com/optionsadvisor.php
The actual extent of the damage to capital markets is still unclear at this point, and while not wanting to be alarmist, I've remained steadfast that the subprime mortgage blow-up was more of a trigger than an isolated event. So far, with the Dow already off more than 14% since the October peak, I've been right. And now it appears that we are in the second phase of a bear market, where losses are the steepest.Stocks go up and down. Make money in both directions with exclusive options advisor.
dtmagazine.com/optionsadvisor.php
Where this is all headed is in the wrong direction. Using Fibonacci calculations of 33, 50 and 67% declines from the previous gain (roughly 6800 points), the declines would be of the order of 2244, 3200 and 4690 points on the Dow.
With the Dow already close to that 2244-point decline, I had expected a bounce and the gains on Friday morning might have been all there was. That makes the next stop around 11,000, and if that breaks down, somewhere around 9500 may be the bottom.
It could get worse, however, if, as anyone paying attention might recall, the stock market began its tremendous bull run at the start of the Iraq War in March of 2003. Considering the massive fiasco that campaign has devolved into, might there be some coupling of the market gains to the war "effort" and if so, what have we wrought but death, destruction and about a trillion dollars in wasted spending?
The last 4 1/2 years of "prosperity" might have been an illusion. If that's the case, we're in for some hard times indeed.
If the Dow drops below 9500 and begins to head for the 7500-8000 area, it could portend catastrophe, not only for the stock market but for the US and possibly all other economies.
Substantial Wealth and Riches Creation
The Path of Substantial Wealth and Riches: Your Parents' Influence on Your Finances
substantialincomes.com
Retracing the missteps of the Great Depression, government was found either powerless or ineffective in stopping natural economic forces from occurring. We may be seeing a similar scenario today. Despite three rate cuts by the Federal Reserve amounting to a total of 1%, stocks still lost considerable value.The Path of Substantial Wealth and Riches: Your Parents' Influence on Your Finances
substantialincomes.com
Now, world reaction to the US government's plan has been met with skepticism if not outright disapproval. Since investors and economists are generally better-equipped than government bureaucrats and politicians to read the "tea leaves" correctly, the instinctive selling by the cognoscente may have already begun. As usual, the really smart money has gotten out of the way earliest.
We may be in the earliest stages of a cataclysmic economic event. Remember, during the Great Depression we had the relative security of the gold standard. Such a limiting mechanism no longer exists in the leveraged world of floating currencies.
If we are indeed going to hell in a handbasket, the signs should be easy to discern and some have already appeared: inept politicians, secrecy and distrust within the banking community, a continuing decline in stocks with only brief respites, falling prices, falling currencies, disruptions in trade and commerce, business failures, bankruptcies, municipal budget pressures, massive real estate foreclosures from delinquencies on mortgages or taxes or both.
Inflation may turn out to be the least of our worries. The temporary advance in prices may turn out to be chimeric as the real devastation of slack demand takes hold in coming months. Inflation can be beaten back. A cyclical deflationary spiral is a demon for which nobody is prepared to confront, but we're fortunately not there yet.
A couple of months ago, I mentioned that some people might consider cashing out their IRA or retirement funds, even if it meant losing 20% of the portfolio's value as a penalty. Today, that almost looks like sound advice, especially if you're invested in an indexed fund. Since August or October, you may already be down close to that 20%. Wouldn't you rather have whatever's left in your control, rather than that of a fund manager who is likely to be chasing profits where none exist?
I am not a pessimist. I am a realist and I only present the views as a cautionary tale. If the worst is yet to come and the economic reality is more severe than most of us wish to imagine, it's far better to be forewarned than caught in the snare of an economy biting the dust.
Is sure hope my father reads this. Despite my constant warnings, he continues to play the market long and loses. I fear for his economic fate, but more for the welfare of those under 18 who don't already have a place at the table, but will be picking up the scraps.
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