If the price of oil goes up much more, the Dow and other US equity indices will readily slide down that slippery slope. The traders know this, investors know this, even the oil executives know this is true and that's the #1 reason the price of oil isn't going to go through the roof.
Oil executives are not fools. They realize that in a slowing economy, they can't be out there greasing the skids with higher fuel costs (well, not too high, anyway), because there's a breaking point and we're getting pretty close to it. The big oil companies charge higher than market prices because they can. Congress and our lax regulatory agencies allow them to effectively rig prices so as to effectively maximize profits. They are not, however, the only corporations with skin in the game. After a while, some of their corporate brethren might want a piece of the greed gravy train as well. If the oil companies siphon off all of the disposable income in the economy, there's little to nothing left for the Wal-Marts, Citigroups and Microsofts of the world because the Exxon-Mobils are taking more then their fair share.
Big oil has been getting fat at the public trough for a long time, but they've really beefed up recently. And they've done so at considerable expense to everyday consumers, governmental bodies and other corporations. It's time for the oil companies to make a little less money and act a little more like responsible corporate citizens for a change (I know, it's very wishful thinking.).
The handwriting is on the wall, and has been for some time. The US economy would be in much better shape if people were spending 20% less for fuel (and not just gas, but home heating oil and natural gas, too) than they are now. The oil companies in the US are an effective monopoly or cartel and Congress should have taken action long ago to curtail their illegal price-fixing operations. Big oil can profess all they like that the refineries aren't operating at full capacity or that they have no control over the price of oil. Unfortunately for them, nobody's buying that argument any more, but it's going to take a pretty big scare on Wall Street for them to mend their ways, and that scare has begun.
Today's trading was more of what we've become accustomed to over the past six weeks: sluggish and lower, pessimism abounding, plenty of rational reasons. The elephant in the room still remains big oil. They're a drag, both in real terms and euphemistically. High fuel prices are getting old and stocks are taking a beating on it. Wealth is not very evenly distributed and there's little new money coming into the markets. Big oil is sucking the life out of the economy.
Whether the oil execs are smart enough, visionary enough, to understand how they'll be damaged in an outright recession remains to be seen. Keep an eye peeled on oil prices, which shot up another $1.15 to $64.08 today. That's now about $6-8 per barrel higher than the economy can handle. Forget about a crash in housing prices. That's a fait accompli. $3.00 per gallon gas will just be more fuel on the fire and will, without a doubt, drag the nation into a recession. While it may already be too late, some relief at the pump would be more than just welcome, it may be necessary.
Dow 12,300.36 -96.93; NASDAQ 2,417.10 -20.33; S&P 500 1,417.23 -12.38; NYSE Composite 9,218.54 -70.25
After Monday's negligible trade, Tuesday and Wednesday have cost the Dow and the other indices anywhere from 1 to 1.5% for the week. After rocketing up 370 points last week, the Dow's given back more than half, 180 points, this week, but still 225 points ahead of the March 13 low point of 12,075.96. There's little doubt that number will be tested again, and soon. First quarter earnings are due to make their way to the street in a week's time, and the trickle down could easily turn into a deluge. Corporate profits have been solid, maybe too good, because companies have some tough numbers to exceed from a year ago. Many will not make the grade.
Wednesday's market internals were nearly a carbon copy of Tuesday's. declining issues were ahead of advancing ones nearly 2-1, with 207 new highs versus 91 new lows. Pessimism is spreading, however, as down volume was 3 times up volume. Traders are getting very picky and that's not generally a sign of a healthy market. The remainder of the week could turn out to be very discouraging indeed.
Today's economic events - a 2.5% rise in durable goods orders and a slackening of crude inventories were just enough to keep buyers on the sidelines. Tomorrow, the government finalizes 4Q '06 GDP, and the tepid pace of 2.2%, if confirmed, will only serve to dampen attitudes. Initial claims may have some effect, but only if it's very much a negative. Friday's miasma of reports, from Personal Income to the Chicago Purchase Manager's Index, may just tip the markets over the edge.
Of course, much more of the now non-stop nonsense emanating from our nation's capitol may prove to be the unseen straw that breaks the camels back. We have a dysfunctional executive branch being hounded by an impatient Congress, all of it heading for a nasty cataclysm. There are a lot of angry, bitter, upset people out there who are certainly not in any kind of mood for any more distasteful news. The American people are fed up and the discontent is growing.
Be prepared for some very unsettling days and weeks ahead.
Wednesday, March 28, 2007
A Little Dose of Reality
As opposed to yesterday's PPT-inspired afternoon rally, the US equity markets today reflected something closer to the reality of the functional economy. Once again, the NASDAQ took the brunt of the blows, but the blue chips of the Dow weren't far behind on a percentage basis.
Dow 12,397.29 -71.78; NASDAQ 2,437.43 -18.20; S&P 500 1,429.61 -7.89; NYSE Composite 9,288.79 -52.57
Declining issues overwhelmed advancers by a more than 2-1 margin and the new highs were kept to a 4-session low of 221, while only 78 issues hit new lows. The markets are still mired in a trench between recent high and low marks, awaiting some kind of economic or political news to break out one way or another.
While only the bulliest of the bulls believe that another new top can be put on this market, the bears still seem to be in semi-hibernation. Neither the China chain-reaction nor the sub-prime blow-out seemed to be enough to ignite increased downside pressure. Volume has been particularly tame on days the indices have risen, so there's at least some indication that the perma-bull mentality has been partially put to rest in some quarters.
In an interesting note on market forces, the consumer confidence reading today from the Conference Board (107.2, down a full 4 points from February's 111.2) seemed to be the main driver. That a soft indicator that market movers should be out in front of makes one wonder who's really in charge on Wall Street and whether the traders actually know what they're doing.
Don't answer that until after earnings season is well underway (April 20th should do) and the market has moved past either February's highs or March's lows.
Maybe the real answer lies not so far from the self-service pump at any of the thousands of gas stations in the US, or in the millions of utility bill envelopes on the tail end of a brutally cold winter. No wonder consumers are feeling a little less warm about their economic futures, as property taxes, auto fuel and home utilities continue to eat away at disposable income.
At least oil prices spent the day dithering about the future, gaining only 2 cents to end at $62.93, still a solid $5 higher than where it should be. Perhaps tomorrow's crude inventory reading will dispel any notions of gouging the US population into $3.00 a gallon gas any time soon. Consumers have had just about enough of high energy prices and markets and market makers may be about to wake up to that factoid.
Gold and silver barely budged. They're in a precarious position, much like stocks, with nowhere to go but lower.
Dow 12,397.29 -71.78; NASDAQ 2,437.43 -18.20; S&P 500 1,429.61 -7.89; NYSE Composite 9,288.79 -52.57
Declining issues overwhelmed advancers by a more than 2-1 margin and the new highs were kept to a 4-session low of 221, while only 78 issues hit new lows. The markets are still mired in a trench between recent high and low marks, awaiting some kind of economic or political news to break out one way or another.
While only the bulliest of the bulls believe that another new top can be put on this market, the bears still seem to be in semi-hibernation. Neither the China chain-reaction nor the sub-prime blow-out seemed to be enough to ignite increased downside pressure. Volume has been particularly tame on days the indices have risen, so there's at least some indication that the perma-bull mentality has been partially put to rest in some quarters.
In an interesting note on market forces, the consumer confidence reading today from the Conference Board (107.2, down a full 4 points from February's 111.2) seemed to be the main driver. That a soft indicator that market movers should be out in front of makes one wonder who's really in charge on Wall Street and whether the traders actually know what they're doing.
Don't answer that until after earnings season is well underway (April 20th should do) and the market has moved past either February's highs or March's lows.
Maybe the real answer lies not so far from the self-service pump at any of the thousands of gas stations in the US, or in the millions of utility bill envelopes on the tail end of a brutally cold winter. No wonder consumers are feeling a little less warm about their economic futures, as property taxes, auto fuel and home utilities continue to eat away at disposable income.
At least oil prices spent the day dithering about the future, gaining only 2 cents to end at $62.93, still a solid $5 higher than where it should be. Perhaps tomorrow's crude inventory reading will dispel any notions of gouging the US population into $3.00 a gallon gas any time soon. Consumers have had just about enough of high energy prices and markets and market makers may be about to wake up to that factoid.
Gold and silver barely budged. They're in a precarious position, much like stocks, with nowhere to go but lower.
Monday, March 26, 2007
Charades, Anyone?
How many times do we have to see this same pattern before we all become complete skeptics?
I pose that question in response to the unusual market movements today which saw all US Equity indices fall sharply at 10:00 am when the
Commerce Dept. reported new home sales fell 3.2% in February. The number of new homes sold in the month was the lowest since June 2000.
At the time, briefing.com (yeah, they're probably in on it) said this:
Yes, that's laughable, along with exhibiting very poor grammar skills. "Moderate drag" my behind.
With this quick drop-off (the Dow was down more than 114 points by 11:00 am) in mind, let's take a look at how the indices closed on Monday:
Dow 12,469.07 -11.94; NASDAQ 2,455.63 +6.70; S&P 500 1,437.50 +1.39; NYSE Composite 9,341.36 +2.96
Now, it doesn't take a genius to conclude that something, somewhere, somehow made the majority of traders feel more secure about buying stocks after noon. It's also not a reach - after the Plunge Protection Team, otherwise known as the President's Working Group on Financial Markets has been mentioned with some frequency of late - to believe there are nefarious forces at work, vainly attempting to keep struggling US stock markets afloat.
Manipulating stock markets is not new, nor is it impossible. There are people, corporations and governments which would think it virtuous to rescue the financial markets from imminent collapse. However, continual, systemic pumping of US markets to sustain a bull market that is already bordering on an absurd length of time (53 months), is quite another thing.
It's not like putting a temporary support - akin to Greenspan's famous 1% "emergency" federal funds rate - under the markets to assuage fears; it is more like extended tinkering with the wheels of commerce, which, after a while, look nothing like what they were originally. Piecemeal adjustments eventually lead to situations in which chain reactions cannot be averted, kind of like fixing various parts of an old clock. In the end, something's going to break that can't be fixed, taking down all of the other "little fixes" along the way.
In any case, whatever evil lurked below 12,350.00 on the Dow was negated by the movers of markets. In a real world, as opposed to our current bizzaro-war-on-terror-take-off-your-shoes-at-airports-world, the Dow would be hovering in the 10,800-11,500 range, and people would be really concerned about their investments. But, thanks to the PPT, no worries!
Besides, crude oil for May delivery is only 62.91 (+0.63 today). Gold and silver were also up and hey, Georgetown's in the Final Four. What's to worry? Be happy.
For more on the President's Working Group on Financial Markets, either Google that term or the term Plunge Protection Team or read this interesting article at the link below (fair warning: it's a PDF):
Move Over Adam Smith: The Visible Hand of Uncle Sam
How many times do we have to see this same pattern before we all become complete skeptics?
I pose that question in response to the unusual market movements today which saw all US Equity indices fall sharply at 10:00 am when the
Commerce Dept. reported new home sales fell 3.2% in February. The number of new homes sold in the month was the lowest since June 2000.
At the time, briefing.com (yeah, they're probably in on it) said this:
Even though the data do not mean that the housing market is crashing and will pull the overall economy into recession, the broader perspective shows that housing is still in a correction and will remain a moderate drag on real GDP for several more quarters.
Yes, that's laughable, along with exhibiting very poor grammar skills. "Moderate drag" my behind.
With this quick drop-off (the Dow was down more than 114 points by 11:00 am) in mind, let's take a look at how the indices closed on Monday:
Dow 12,469.07 -11.94; NASDAQ 2,455.63 +6.70; S&P 500 1,437.50 +1.39; NYSE Composite 9,341.36 +2.96
Now, it doesn't take a genius to conclude that something, somewhere, somehow made the majority of traders feel more secure about buying stocks after noon. It's also not a reach - after the Plunge Protection Team, otherwise known as the President's Working Group on Financial Markets has been mentioned with some frequency of late - to believe there are nefarious forces at work, vainly attempting to keep struggling US stock markets afloat.
Manipulating stock markets is not new, nor is it impossible. There are people, corporations and governments which would think it virtuous to rescue the financial markets from imminent collapse. However, continual, systemic pumping of US markets to sustain a bull market that is already bordering on an absurd length of time (53 months), is quite another thing.
It's not like putting a temporary support - akin to Greenspan's famous 1% "emergency" federal funds rate - under the markets to assuage fears; it is more like extended tinkering with the wheels of commerce, which, after a while, look nothing like what they were originally. Piecemeal adjustments eventually lead to situations in which chain reactions cannot be averted, kind of like fixing various parts of an old clock. In the end, something's going to break that can't be fixed, taking down all of the other "little fixes" along the way.
In any case, whatever evil lurked below 12,350.00 on the Dow was negated by the movers of markets. In a real world, as opposed to our current bizzaro-war-on-terror-take-off-your-shoes-at-airports-world, the Dow would be hovering in the 10,800-11,500 range, and people would be really concerned about their investments. But, thanks to the PPT, no worries!
Besides, crude oil for May delivery is only 62.91 (+0.63 today). Gold and silver were also up and hey, Georgetown's in the Final Four. What's to worry? Be happy.
For more on the President's Working Group on Financial Markets, either Google that term or the term Plunge Protection Team or read this interesting article at the link below (fair warning: it's a PDF):
Move Over Adam Smith: The Visible Hand of Uncle Sam
Mod Market: Updating...
"Cars and girls are easy come by in this day and age,
Laughing, joking, drinking, smoking,
Till I've spent my wage."
-- The Yardbirds, Over, Under, Sideways, Down, 1966
The year was 1966. Gasoline was 35¢ a gallon. A new car would set you back around $1500. The Dow was trading in triple digits. The British rock invasion was well underway. Life was good; you could spend your paycheck on booze, cigarettes and loose women and not worry about next week.
How times change. Gas and cars are now 8-12 times more expensive. $1000 invested in the Dow in 1966 would be worth $18,000 today. No wonder we're not all millionaires. While the Dow and stocks in general have outpaced inflation, they barely did so. Which brings us to Friday's close...
Dow 12, 481.01 +19.87; NASDAQ 2,456.18 +4.44; S&P 500 1,436.11 +1.57; NYSE Composite 9,338.40 +24.58
The major indices showed nifty gains for the week, though they're still below the mid-February highs. It's the way this market has been for over a month now, a corrective phase that's yet to play out fully. Friday's volume was the weakest of the week, underscoring the relatively tame gains. Traders are still uncertain of the direction here and skeptical of future gains.
Somewhat depressing for traders - and everyone else for that matter - is the continuing high price of gasoline at the pump, and the recent one-day spike (from $56 to over $60) when the crude oil futures turned over from April to May. Apparently, those controlling the price of oil are afraid that Global Warming will kill us all, and are trying to beat the environment to the punch.
This market continues to bounce around: over, under, sideways, but mostly, down.
Laughing, joking, drinking, smoking,
Till I've spent my wage."
-- The Yardbirds, Over, Under, Sideways, Down, 1966
The year was 1966. Gasoline was 35¢ a gallon. A new car would set you back around $1500. The Dow was trading in triple digits. The British rock invasion was well underway. Life was good; you could spend your paycheck on booze, cigarettes and loose women and not worry about next week.
How times change. Gas and cars are now 8-12 times more expensive. $1000 invested in the Dow in 1966 would be worth $18,000 today. No wonder we're not all millionaires. While the Dow and stocks in general have outpaced inflation, they barely did so. Which brings us to Friday's close...
Dow 12, 481.01 +19.87; NASDAQ 2,456.18 +4.44; S&P 500 1,436.11 +1.57; NYSE Composite 9,338.40 +24.58
The major indices showed nifty gains for the week, though they're still below the mid-February highs. It's the way this market has been for over a month now, a corrective phase that's yet to play out fully. Friday's volume was the weakest of the week, underscoring the relatively tame gains. Traders are still uncertain of the direction here and skeptical of future gains.
Somewhat depressing for traders - and everyone else for that matter - is the continuing high price of gasoline at the pump, and the recent one-day spike (from $56 to over $60) when the crude oil futures turned over from April to May. Apparently, those controlling the price of oil are afraid that Global Warming will kill us all, and are trying to beat the environment to the punch.
This market continues to bounce around: over, under, sideways, but mostly, down.
Thursday, March 22, 2007
Split Thursday as Oil Pumps Higher
There's just no turning the suckers away from the blue chips of the Dow it seems. While the other major indices were slightly lower, the Dow gained a little, just to keep hopes alive.
The major news came from the oil fields today, where crude for May delivery added 2.08 to end the day at $61.69. It seems that our beloved oil barons can't get enough of our greenbacks. Sooner or later, the price of oil and gasoline will cause a major implosion in the economy, unless, of course, it already has and nobody's admitting it yet.
Dow 12,461.14 +13.62; NASDAQ 2,451.74 -4.18; S & P 500 1,434.54 -0.50; NYSE Composite 9,313.82 -3.91
But whatever happens with the price of oil and the health of the economy still doesn't seem to be worth enough attention to slow down stocks. Naturally, interest rates staying in the same position they've been for nearly a year can spark a 150+ point rally.
Considering the folly of the people pushing stocks ever higher, one can only gawk at the valuations. Regardless of the relative health or malaise of the overall economy (it's OK, but not great), investors seem bent on buying no matter the cost. There's a problem there, in that folly is almost always followed by disaster, and that could just be looming with the spate of corporate earnings about to be announced.
We'll know more in about two weeks when corporations begin rolling out their 1st quarter results. There was a little taste of that today as Motorola warned investors that they would return results below estimates. Boo-hoo. More to come.
The major news came from the oil fields today, where crude for May delivery added 2.08 to end the day at $61.69. It seems that our beloved oil barons can't get enough of our greenbacks. Sooner or later, the price of oil and gasoline will cause a major implosion in the economy, unless, of course, it already has and nobody's admitting it yet.
Dow 12,461.14 +13.62; NASDAQ 2,451.74 -4.18; S & P 500 1,434.54 -0.50; NYSE Composite 9,313.82 -3.91
But whatever happens with the price of oil and the health of the economy still doesn't seem to be worth enough attention to slow down stocks. Naturally, interest rates staying in the same position they've been for nearly a year can spark a 150+ point rally.
Considering the folly of the people pushing stocks ever higher, one can only gawk at the valuations. Regardless of the relative health or malaise of the overall economy (it's OK, but not great), investors seem bent on buying no matter the cost. There's a problem there, in that folly is almost always followed by disaster, and that could just be looming with the spate of corporate earnings about to be announced.
We'll know more in about two weeks when corporations begin rolling out their 1st quarter results. There was a little taste of that today as Motorola warned investors that they would return results below estimates. Boo-hoo. More to come.
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