Normally, the last day of the month is marked by incessant buying of momentum stocks by fund managers and other hucksters hoping to impress clients by owning shares of the most popular companies, but today's shopping spree was truncated by a terrible Chicago PMI report, which weighed down markets, sending all of the major indices into the red.
The PMI report, which was released to the public just fifteen minutes into the session, printed at 56.2, the lowest number since November, 2009, missing expectations of 60.0 by a country mile.
Despite any and all opinions to the contrary, this number was just another in a string of disappointing economic data, highlighted by last week's first estimate of first quarter GDP of 2.2% annualized growth. While commentators have thus far downplayed the importance of the GDP figure, the evidence is stark, especially when reinforced by the PMI today.
Not wishing to face the bitter truth that the US - and by many measures, the global - economy has stalled out once again, Wall Street refuses to set about the arduous task of taking profits and marking stocks down to reasonable valuations, whatever those might be. Stocks have been trading far from fundamentals and investors haven't paid heed to the undercurrents of decline in Europe, Asia and here in the Western Hemisphere, though that line of thinking may be changing soon.
Sell in May and Stay Away goes the timeless adage. Why stocks should encounter such a seasonal variation is of questionable veracity, but if oil prices (which declined today) remain elevated as they have been through the summer, the banking and investing goons and their paid servants in Washington DC might get a dose of bad medicine courtesy of Mr. Market, delivered by Adam Smith's fabled invisible hand that routinely cycles in and out of market dynamics and pays special attention to bubbles and irrationality.
Beyond high oil prices, the US housing industry is still in a shambles, despite the clarion call to investors rushing in to snatch up foreclosed properties with the intent to turn them into rentals. This current calamity-in-the-making ignores the most basic tenet of community: home ownership is an issue of pride. Taking what were once owner-occupied dwellings and turning them into rentals (to whom and at what price we do not know) is a basic destructor of neighborhoods and communities. The dwellings fall into disrepair, the neighborhood deteriorates and eventually, the fine "rental investment" becomes a rat hole and drug house, surrounded by wary neighbors who decry their falling property values and eventually abandon the area.
Once a neighborhood changes from owner-occupied to rental status, the changes, though subtle, are irreversible, the tipping point likely reached when at least 40% of the properties assume rental status. The changes may take years or even decades in normal times, though in the current situation, in which home values have already been whacked for a loop, buying at bargain basement prices, while alluring to investors and productive of cash flow, may turn out to be just the beginning of a non-virtuous cycle. Renters move in, neighborhoods decline, property values continue to fall and recouping the original investment may never materialize. The next step in the process is that of the investors walking away, having milked the value from the properties via rental income, the community destroyed by their ravenous profit appetite. That's why neighborhoods become ghettos in the first place and stay ghettos, ever after. Wash, rinse, repeat.
Beside the ill-conceived notion that the real estate market has bottomed (a laughable and lamentable idea if ever there was one - it was the topic of a one-page feature in the current issue of Esquire, so there's that canard), the Fed is stalling on plans for more stimulus, which is apparently needed, even though it doesn't work long run, and Europe is fast-falling into recession. China's growth is being internalized, austerity policies haven't done squiddly-doo to revamp broken sovereign balance sheets and the debt bubble continues to expand.
Some day, the Keynesians in and out of government and the policy houses will finally be outed by forces of markets which are stronger than any academic noise and nonsense. The real world doesn't always cooperate with economic theory and we are seeing it played out at breathtaking pace.
There's truly only one solution for an overhang of malinvestment and debt: loss. And it will surely visit those who have the most to lose.
Mark down April as the worst month for stocks thus far, but lay bets that there will be worse to come.
Dow 13,213.63, -14.68 (0.11%)
NASDAQ 3,046.36, -22.84 (0.74%)
S&P 500 1,397.91, -5.45 (0.39%)
NYSE Composite 8,118.95, -32.96 (0.40%)
NASDAQ Volume 1,585,325,125
NYSE Volume 3,379,976,250
Combined NYSE & NASDAQ Advance - Decline: 2056-3568
Combined NYSE & NASDAQ New highs - New lows: 190-40
WTI crude oil: 104.87, -0.06
Gold: 1,664.20, -0.60
Silver: 30.96, -0.39
Showing posts with label rentals. Show all posts
Showing posts with label rentals. Show all posts
Monday, April 30, 2012
Monday, January 9, 2012
Euro a Bit Higher; Stocks Barely Respond as Sinking Feeling Persists
After the first week of trading turned out to be one big cork pop on January 3rd - when the Dow soared 180 points, mostly at the open - and a slow melt lower, the first Monday of the new year was more evidence of just how sick, tired and moribund global markets have become. It's as though everybody is just waiting for the other shoe to drop, that some seismic implosion - most likely in Europe - is about to send stocks into a prolonged tailspin that ends in repudiation of sovereign debt and another huge blow to the fiat-based banking system.
Evidence exists that all is not well in Euroland, while pundits here in America point to the only positive metric they can see, higher corporate profits, though even there, signs are beginning to emerge that the record profits from 2011 are as fleeting as the passage of a few moments in time.
Estimates for 4th quarter corporate earnings have been slashed, and the number of pre-announcements from companies is at a three-year high, harkening back to the dismal days of early 2009, when there was nothing anybody or any company could do to halt the continuing downturn.
Even today's rather slow-moving market was full of tepid trading, highlighted by fractional moves in the averages, suggesting that nothing short of a complete overhaul of Europe's finances - and maybe even our own - can provide the kind of stimulus needed to restore investor confidence, which has waned severely since the middle of last year.
Even the bold joint pronouncement today by France's Nicolas Sarkozy and Germany's Angela Merkel failed to inspire any confidence. The two leaders set a timetable of March 1 for Euro-zone leaders to detail a plan of stricter budgetary restraint among member nations. Of course, critics and skeptics claim to have heard that song before. In the original agreement, a nation's current deficit was not supposed to exceed 3%. Any claims that sovereign states will clean up their balance sheets and act responsibly is met with jeers and, soon, tears.
America met a seminal moment in its own history today, as the nation's debt equalled its GDP, putting the world's powerhouse economy on a level approaching that of Italy, Greece or Portugal.
For its part, the White House appears ready to jettison all the bad residential loans held at Fannie Mae and Freddie Mac by turning them over to investors in bulk, with an eye toward turning over two million foreclosed and now-delinquent homes into rental properties, overseen by a hand-picked, large, well-capitalized property management firms.
The plan was first introduced by the Federal Reserve last week, though our friend Jim Willie, aka, the Golden Jackass, has been predicting such a move for the past two years, with deleterious effects abundant. The problems, from even a casual point of view, range from traditional homeowners being shut out of owning affordable housing and being forced to rent at increasingly-expensive rates, to the potential of default on property taxes should one of these "well-financed" firms going bust. It's almost the sub-prime crisis in reverse and is a radical departure from the American dream of home-ownership.
The property managers will likely receive sweet-heart deals from the government, slashing the prices to be paid on the homes instead of offering principal write-downs to strapped homeowners or new, qualified applicants because banks have been steadfastly denying mortgages and credit to even the most risk averse individuals and families.
We are quickly heading into a bleak, black hole of socialism, wherein the next shoe to drop won't be a ballet slipper but rather the boot of the storm trooper landing squarely on the necks of millions of tax-and-debt slaves, while the rich get bailouts and the poor get handouts.
Fairness is a word that seems to have permanently departed the American scene. Economic ugliness and despair approaches at breakneck speed all in the name of keeping up appearances.
After the closing bell, Alcoa (AA) kicked off earnings season with a disappointing, yet fitting, loss of three cents per share.
Dow 12,392.69, +32.77 (0.27%)
NASDAQ 2,676.56, +2.34 (0.09%)
S&P 500 1,280.70, +2.89 (0.23%)
NYSE Composite 7,583.76, +26.08 (0.35%)
NASDAQ Volume 1,777,449,250
NYSE Volume 3,248,196,250
Combined NYSE & NASDAQ Advance - Decline: 3385-2189
Combined NYSE & NASDAQ New highs - New lows: 170-62
WTI crude oil: 101.31, -0.25
Gold: 1,608.10, -8.70
Silver: 28.78, +0.10
Evidence exists that all is not well in Euroland, while pundits here in America point to the only positive metric they can see, higher corporate profits, though even there, signs are beginning to emerge that the record profits from 2011 are as fleeting as the passage of a few moments in time.
Estimates for 4th quarter corporate earnings have been slashed, and the number of pre-announcements from companies is at a three-year high, harkening back to the dismal days of early 2009, when there was nothing anybody or any company could do to halt the continuing downturn.
Even today's rather slow-moving market was full of tepid trading, highlighted by fractional moves in the averages, suggesting that nothing short of a complete overhaul of Europe's finances - and maybe even our own - can provide the kind of stimulus needed to restore investor confidence, which has waned severely since the middle of last year.
Even the bold joint pronouncement today by France's Nicolas Sarkozy and Germany's Angela Merkel failed to inspire any confidence. The two leaders set a timetable of March 1 for Euro-zone leaders to detail a plan of stricter budgetary restraint among member nations. Of course, critics and skeptics claim to have heard that song before. In the original agreement, a nation's current deficit was not supposed to exceed 3%. Any claims that sovereign states will clean up their balance sheets and act responsibly is met with jeers and, soon, tears.
America met a seminal moment in its own history today, as the nation's debt equalled its GDP, putting the world's powerhouse economy on a level approaching that of Italy, Greece or Portugal.
For its part, the White House appears ready to jettison all the bad residential loans held at Fannie Mae and Freddie Mac by turning them over to investors in bulk, with an eye toward turning over two million foreclosed and now-delinquent homes into rental properties, overseen by a hand-picked, large, well-capitalized property management firms.
The plan was first introduced by the Federal Reserve last week, though our friend Jim Willie, aka, the Golden Jackass, has been predicting such a move for the past two years, with deleterious effects abundant. The problems, from even a casual point of view, range from traditional homeowners being shut out of owning affordable housing and being forced to rent at increasingly-expensive rates, to the potential of default on property taxes should one of these "well-financed" firms going bust. It's almost the sub-prime crisis in reverse and is a radical departure from the American dream of home-ownership.
The property managers will likely receive sweet-heart deals from the government, slashing the prices to be paid on the homes instead of offering principal write-downs to strapped homeowners or new, qualified applicants because banks have been steadfastly denying mortgages and credit to even the most risk averse individuals and families.
We are quickly heading into a bleak, black hole of socialism, wherein the next shoe to drop won't be a ballet slipper but rather the boot of the storm trooper landing squarely on the necks of millions of tax-and-debt slaves, while the rich get bailouts and the poor get handouts.
Fairness is a word that seems to have permanently departed the American scene. Economic ugliness and despair approaches at breakneck speed all in the name of keeping up appearances.
After the closing bell, Alcoa (AA) kicked off earnings season with a disappointing, yet fitting, loss of three cents per share.
Dow 12,392.69, +32.77 (0.27%)
NASDAQ 2,676.56, +2.34 (0.09%)
S&P 500 1,280.70, +2.89 (0.23%)
NYSE Composite 7,583.76, +26.08 (0.35%)
NASDAQ Volume 1,777,449,250
NYSE Volume 3,248,196,250
Combined NYSE & NASDAQ Advance - Decline: 3385-2189
Combined NYSE & NASDAQ New highs - New lows: 170-62
WTI crude oil: 101.31, -0.25
Gold: 1,608.10, -8.70
Silver: 28.78, +0.10
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