There is usually a lot of hot air circulating around the caverns of Wall Street, but between yesterday and today, the gum flapping and effusion of carbon dioxide was absolutely stifling. Stocks and mutual funds were talked up as though the magic of Ben Bernanke's federal funds rate cut actually made them worth more. The word genius was bandied about.
In other circles, words such as idiot, traitor and appeaser were heard spoken near the Chairman's name. Not everyone was equally enamored with the re-ignition of easy credit.
Holders of dollars - which would be just about every American citizen - were sullen as the dollar sank to new depths against other, more stable, currencies. Only the debt-ridden corporate culturalists were really in a celebratory mood, and by the end of the trading session, the market had cooled considerably.
Dow 13,815.56 +76.17; NASDAQ 2,666.48 +14.82; S&P 500 1,529.03 +9.25; NYSE Composite 9,970.90 +61.87
By the end of the day, the NASDAQ and S&P had pared earlier gains by more than half, the Dow lost 2/5ths of the morning advance. Cooler minds had crashed the party and were prevailing late in the day. Wall Street's cheap credit rally was fizzling.
Nonetheless, Advancing issues outpaced decliners by a healthy 2-1 margin and new highs at last put some distance over new lows, 411-107.
While Wall Street was partying, signs that the underlying economy was in tatters were everywhere.
Oil gained 42 cents to close at $81.93, another record. Banking bellwether Morgan Stanley (MS) missed their quarterly estimate by 16 cents and took a beating. Housing starts fell to their lowest levels in 12 years. The dollar was being sold off against the Euro, hitting a new low of .7162 or an exchange rate of $1.3963 dollars per Euro. Less than a decade ago, one Euro cost 87 cents. The value of the greenback has fallen by more than 40% in just 8 years.
Gold rose $5.80 to $729.50. Silver added 18 cents to $13.11. All aboard the commodities train. It's about to leave the station.
Bernanke gave away the house to save the pretty front porch. His rate cuts will certainly be tonic for Wall Street, and toxic for the US economy. The liquidity crisis continues apace. There will be major bank failures within the next 18 months as the credit cycle spirals ahead without anyone, including the Chairman of the Federal Reserve, the Treasury Secretary, Congress and the President, acting responsibly.
Wednesday, September 19, 2007
Tuesday, September 18, 2007
Ben Bernanke, Golden Goose
The FOMC of the Fed pleased all of Wall Street by cutting the federal funds rate by a full 50 basis points on Tuesday - from 5.25 to 4.75% and investors responded with the biggest single-day gains of the year.
Dow 13,739.39 +335.97; NASDAQ 2,651.66 +70.00; S&P 500 1,519.78 +43.13; NYSE Composite 9,909.03 +301.28
Stocks were already higher on the day (the Dow was up about 90 points) when Bernanke unleashed his first real policy directive onto the market. The response was impressive, though highly predictable. Buyers were running over each other to buy stocks which just a few days ago they shunned. It was everything Wall Street wanted and then some, though the cuts signal that there are indeed deep, troubling technical conditions in the US economy which needed this kind of kick-start.
Among the issues facing the US economy are a continuing credit crisis, stemming from loose policy in mortgage markets and hedge funds, a stalled-out employment market, the twin deficits - the government's and the trade imbalance - high oil prices and a weakening dollar.
Today's 1/2-point cut did nothing to salve any of those wounds, yet Wall Street found the news to be encouraging enough to go headlong into an outright exuberant shopping spree.
Bernanke, supposedly a cautious sort, showed that he could and would take decisive action to spur markets. Many expected him to only cut rates 25 basis points, but this decision showed him to be as loosey-goosey as his predecessor, the wily Alan Greenspan.
How long the excitement will last on the Street remains to be seen. The Dow is now less than 300 points from its all-time closing high and the NASDAQ, which had been sluggish of late, threw in a 70-point gain on the day. Much of today's gains were surely short covering, as those betting against the market were shocked into buying up borrowed shares.
Bernanke also cut the discount rate by the same number, to 5.25%, a move to keep liquidity in the banking and brokerage sectors.
Internals were stunningly one-sided. Advancing issues outdistanced decliners by a 6-1 margin, and new highs finally had a positive day, trouncing new lows, 268-170.
Oil continued to rise unnoticed through the euphoric atmosphere, gaining 88 cents to another all-time record high of $81.45 a barrel. As expected gold and silver were silent, both posting negligible gains.
Bernanke may be the Golden Goose today, but the question of whether he will be able to deliver more golden eggs and guide the economy through a rough time, remains an open question.
Dow 13,739.39 +335.97; NASDAQ 2,651.66 +70.00; S&P 500 1,519.78 +43.13; NYSE Composite 9,909.03 +301.28
Stocks were already higher on the day (the Dow was up about 90 points) when Bernanke unleashed his first real policy directive onto the market. The response was impressive, though highly predictable. Buyers were running over each other to buy stocks which just a few days ago they shunned. It was everything Wall Street wanted and then some, though the cuts signal that there are indeed deep, troubling technical conditions in the US economy which needed this kind of kick-start.
Among the issues facing the US economy are a continuing credit crisis, stemming from loose policy in mortgage markets and hedge funds, a stalled-out employment market, the twin deficits - the government's and the trade imbalance - high oil prices and a weakening dollar.
Today's 1/2-point cut did nothing to salve any of those wounds, yet Wall Street found the news to be encouraging enough to go headlong into an outright exuberant shopping spree.
Bernanke, supposedly a cautious sort, showed that he could and would take decisive action to spur markets. Many expected him to only cut rates 25 basis points, but this decision showed him to be as loosey-goosey as his predecessor, the wily Alan Greenspan.
How long the excitement will last on the Street remains to be seen. The Dow is now less than 300 points from its all-time closing high and the NASDAQ, which had been sluggish of late, threw in a 70-point gain on the day. Much of today's gains were surely short covering, as those betting against the market were shocked into buying up borrowed shares.
Bernanke also cut the discount rate by the same number, to 5.25%, a move to keep liquidity in the banking and brokerage sectors.
Internals were stunningly one-sided. Advancing issues outdistanced decliners by a 6-1 margin, and new highs finally had a positive day, trouncing new lows, 268-170.
Oil continued to rise unnoticed through the euphoric atmosphere, gaining 88 cents to another all-time record high of $81.45 a barrel. As expected gold and silver were silent, both posting negligible gains.
Bernanke may be the Golden Goose today, but the question of whether he will be able to deliver more golden eggs and guide the economy through a rough time, remains an open question.
Monday, September 17, 2007
Stocks Slide Awaiting Fed
In what could only be described as sluggish trade, US indices moved narrowly to the downside on Monday as investors took an extended weekend in advance of the FOMC meeting on Tuesday.
At 2:15 pm Eastern tomorrow, the Federal Open Market Committee of the Federal Reserve will make the most important announcement of the week, maybe the month. At that time, Chairman Ben Bernanke and the Fed governors will announce one of three rate moves: 1. No change in Fed Funds rate; 2. a 25 basis point decrease; or 3. a 50 basis point increase. Essentially, no other moves are possible and the odds are on the middle move, dragging rates down from the current 5.25% to an even 5%.
The Fed hasn't moved rates in well over a year, and the Wall Street gang would love to get a 50 basis point reduction, though Chairman Bernanke has shown lately a resolve to take a rather circumspect and conservative approach.
The functional word is may, in that Bernanke is likely not convinced that looser credit is necessarily a good thing for the economy, Wall Street be damned. What the Fed understands more than Wall Street is that Fed rate moves have less to do with the smooth functioning of the economy than do government policy, which has been dreadful for at least the past 6 years. The federal government has done nothing to reduce deficits, ease gas prices, balance the trade deficit, create American jobs or generally do anything of substance to improve the general welfare.
It's for that reason that the Fed may opt to do nothing, allowing market forces to work itself out. The Bernanke Fed doesn't want to be portrayed as a fixer or bail out artist, though behind the scenes they've made liquidity readily available in response to the sub-prime-induced credit crisis.
Dow 13,403.42 -39.10; NASDAQ 2,581.66 -20.52; S&P 500 1,476.65 -7.60; NYSE Composite 9,607.75 -65.90
Despite the thin trade, market breadth was pretty stunning. Declining issues swamped advancers by a 5-2 margin and new lows raced ahead of new highs, 224-117. These indicators reflect a continuing bearish bias that even a 50 basis point rate cut will not vanquish.
Wall Street bulls know they are in trouble and they're likely going to try to make Bernanke a scapegoat, instead of understanding and revealing that fundamentals in the market and fiscal policy still matter.
Meanwhile, oil hit a new high of $80.57, gaining a whopping $1.47 on the day. The absurdity in the oil markets will eventually cause a bust of major proportions. Nobody is paying that rate in futures markets except manipulators and blind speculators.
Gold shot up another $6.00 to close at an 18-month high of $723.80. Silver added 20 cents to $12.90. The rise in the metals augurs nothing but trouble for equities, as though anyone needed a reminder.
Tomorrow ought to be a doozy.
At 2:15 pm Eastern tomorrow, the Federal Open Market Committee of the Federal Reserve will make the most important announcement of the week, maybe the month. At that time, Chairman Ben Bernanke and the Fed governors will announce one of three rate moves: 1. No change in Fed Funds rate; 2. a 25 basis point decrease; or 3. a 50 basis point increase. Essentially, no other moves are possible and the odds are on the middle move, dragging rates down from the current 5.25% to an even 5%.
The Fed hasn't moved rates in well over a year, and the Wall Street gang would love to get a 50 basis point reduction, though Chairman Bernanke has shown lately a resolve to take a rather circumspect and conservative approach.
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What will probably come out of the meeting is the 25 basis point move with some language in the release indicating that more cuts may be necessary.The Path of Substantial Wealth and Riches: Your Parents' Influence on Your Finances
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The functional word is may, in that Bernanke is likely not convinced that looser credit is necessarily a good thing for the economy, Wall Street be damned. What the Fed understands more than Wall Street is that Fed rate moves have less to do with the smooth functioning of the economy than do government policy, which has been dreadful for at least the past 6 years. The federal government has done nothing to reduce deficits, ease gas prices, balance the trade deficit, create American jobs or generally do anything of substance to improve the general welfare.
It's for that reason that the Fed may opt to do nothing, allowing market forces to work itself out. The Bernanke Fed doesn't want to be portrayed as a fixer or bail out artist, though behind the scenes they've made liquidity readily available in response to the sub-prime-induced credit crisis.
Dow 13,403.42 -39.10; NASDAQ 2,581.66 -20.52; S&P 500 1,476.65 -7.60; NYSE Composite 9,607.75 -65.90
Despite the thin trade, market breadth was pretty stunning. Declining issues swamped advancers by a 5-2 margin and new lows raced ahead of new highs, 224-117. These indicators reflect a continuing bearish bias that even a 50 basis point rate cut will not vanquish.
Wall Street bulls know they are in trouble and they're likely going to try to make Bernanke a scapegoat, instead of understanding and revealing that fundamentals in the market and fiscal policy still matter.
Meanwhile, oil hit a new high of $80.57, gaining a whopping $1.47 on the day. The absurdity in the oil markets will eventually cause a bust of major proportions. Nobody is paying that rate in futures markets except manipulators and blind speculators.
Gold shot up another $6.00 to close at an 18-month high of $723.80. Silver added 20 cents to $12.90. The rise in the metals augurs nothing but trouble for equities, as though anyone needed a reminder.
Tomorrow ought to be a doozy.
Friday, September 14, 2007
Stocks Gain Amid Turmoil
There hasn't been much good news concerning the US economy of late, yet investors - or maybe the goodfellas at the PPT - saw fit to boost stocks over the course of a slow trading week.
Oil prices reached an all-time high; the internal, arcane, technical and highly-secret credit malaise has reached astonishing proportions; consumer spending is disappointing and capacity utilization is flat. Add to those list of ho-hums the bailout of Northern Rock, the U.K.'s fifth-largest mortgage lender, by the normally stoic Bank of England. The BofE will prop up Northern Rock with an undisclosed infusion of credit and capital as a "lender of last resort."
Dow 13,442.52 +17.64; NASDAQ 2,602.18 +1.12; S&P 500 1,484.25 +0.30; NYSE Composite 9,673.65 -4.47
While markets in Europe were roiled by the news, US markets barely skipped a beat on a very slow trading day. Stocks for the week experienced excellent gains in hopeful advance of a Fed rate cut when the FOMC meets on Tuesday. With expectations high and largely priced-in, anything short of a 50 basis point cut by the Fed in the Federal Funds rate - from 5.25 to 4.75 - will send markets reeling.
One look at a 5-year chart of the Dow (see right) will reveal that we may be looking at the final run of a very long bull market. The last rise, from 12,000 to 14,000 was spectacular, though interrupted by a serious hiccup in February, which should have served as notice that the end was in sight.
The recent volatility amid now slim trading markets indicates that the credit crisis fomented by sub-prime loans and packaged mortgage investments gone bust has spread throughout the economy and is still growing. A rate cut next week will only exacerbate the condition rather than heal it.
Nonetheless, advancing issues outpaced decliners by a 4-3 margin again today, though new lows retained their lead position over new highs, 224-137. This broken metric continues to indicate a fundamentally weak market, spurred higher by unwise speculation.
Oil fell back 99 cents after setting a record high price on Thursday,
Looking ahead to next week, don't expect much action until the Fed release at 2:15 on Tuesday. After that, it's anybody's guess and highly dependent on what the Fed decides. The market and various analysts (who have shown time and again how wrong they can be) are predicting at least a 1/4-point cut by the Fed, though most would prefer 1/2-point. Either way, they are all wrong and a Fed cut, or worse, a series of them, will send the economy into an even deeper and longer tailspin. Count on it.
Oil prices reached an all-time high; the internal, arcane, technical and highly-secret credit malaise has reached astonishing proportions; consumer spending is disappointing and capacity utilization is flat. Add to those list of ho-hums the bailout of Northern Rock, the U.K.'s fifth-largest mortgage lender, by the normally stoic Bank of England. The BofE will prop up Northern Rock with an undisclosed infusion of credit and capital as a "lender of last resort."
Dow 13,442.52 +17.64; NASDAQ 2,602.18 +1.12; S&P 500 1,484.25 +0.30; NYSE Composite 9,673.65 -4.47
While markets in Europe were roiled by the news, US markets barely skipped a beat on a very slow trading day. Stocks for the week experienced excellent gains in hopeful advance of a Fed rate cut when the FOMC meets on Tuesday. With expectations high and largely priced-in, anything short of a 50 basis point cut by the Fed in the Federal Funds rate - from 5.25 to 4.75 - will send markets reeling.
One look at a 5-year chart of the Dow (see right) will reveal that we may be looking at the final run of a very long bull market. The last rise, from 12,000 to 14,000 was spectacular, though interrupted by a serious hiccup in February, which should have served as notice that the end was in sight.The recent volatility amid now slim trading markets indicates that the credit crisis fomented by sub-prime loans and packaged mortgage investments gone bust has spread throughout the economy and is still growing. A rate cut next week will only exacerbate the condition rather than heal it.
Nonetheless, advancing issues outpaced decliners by a 4-3 margin again today, though new lows retained their lead position over new highs, 224-137. This broken metric continues to indicate a fundamentally weak market, spurred higher by unwise speculation.
Oil fell back 99 cents after setting a record high price on Thursday,
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closing at a still-unsustainable $79.10. Gold was down a piddling 10 cents while silver gained 3 pennies. It truly was a day to stay home.Forex Foreign Currency Exchange Trading Beginner's Resource Center.
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Looking ahead to next week, don't expect much action until the Fed release at 2:15 on Tuesday. After that, it's anybody's guess and highly dependent on what the Fed decides. The market and various analysts (who have shown time and again how wrong they can be) are predicting at least a 1/4-point cut by the Fed, though most would prefer 1/2-point. Either way, they are all wrong and a Fed cut, or worse, a series of them, will send the economy into an even deeper and longer tailspin. Count on it.
Thursday, September 13, 2007
Credit Crunch Bail-Out
According the Mr. Practical at Minyanville, "World-wide central banks injected $383 billion in credit to the world’s banks just in August. That is just an amazing number. It is unprecedented."
Of course, Mr. Practical is right. World central banks are in a precarious position. All of this money sloshing around is likely to find some places to blow up, and the most likely places are in the US and Great Britain, where the excesses and risk-taking have been phenomenal.
What does this all mean? According to Mr. Practical (and I've noted this as well), the stock markets have seized up and are being kept afloat by the unprecedented infusions of capital from central banks, who may, when this all unravels, face one of two conditions: 1. their own bankruptcy (highly probable in the US), or 2. Ownership of vast portfolios of stocks (the end of free markets).
Neither of these conditions is desirable. Worth noting is yesterday's move by the Senate Finance Committee to raise the debt limit to nearly $10 trillion. So, maybe the federal government will buy up most of Wall Street's troubled stocks with debt, sell it to China and thus avert a bloody war by allowing foreigners to take over all US assets without firing a single shot. That's a very nifty strategy by our nitwit Congress and sly fox administration, though overtly treasonous. They should all be in jail.
Interestingly, today's outsize market gains were led by two of the most debt-ridden companies on the planet, General Motors (GM) and Countrywide Financial (CFC). GM was up 10% on news that UAW president, Ron Gettelfinger, agrees in principle to the creation of a multibillion-dollar health-care trust fund. Countrywide was up 13% on news of another round of emergency funding, to the tune of $12 billion. Neither the names of the creditors nor the terms of the loan were disclosed.
Dow 13,424.88 +133.23; NASDAQ 2,601.06 +8.99; S&P 500 1,483.95 +12.39; NYSE Composite 9,678.12 +79.39
Technology, located mostly in the NASDAQ, lagged the market badly as the Dow Jones Industrials led the way. As large as the gains may have seemed, the breath of the market was rather thin. Advancers held a 5-4 margin over declining issues. New lows continued to lead new highs, 207-155. The fundamentals of this market still are not positive despite a couple of solid sessions this week.
Keeping some perspective, oil was up only 18 cents, though it cracked a new all-time high, closing at $80.09. The gold rally has stalled for the time being, with the yellow stuff down $2.80 to $717.90. Silver eased 11 cents to $12.68. If you're looking to bet on the metals, silver is well undervalued in relation to cousin gold, though price pressures from manufacturers could have some say in keeping the price down for now. It's still a very solid hedge position at current levels and I wouldn't chide anyone buying at any price under $13.25.
It also should be pointed out that trading was light on major exchanges. Key events to keep in mind are tomorrow's nationwide stand down by the Air Command and Tuesday's Fed meeting. There may be major news on the political front stemming from tensions in the Middle East, which have reached a boiling point not only on Capitol Hill, but throughout the region.
Of course, Mr. Practical is right. World central banks are in a precarious position. All of this money sloshing around is likely to find some places to blow up, and the most likely places are in the US and Great Britain, where the excesses and risk-taking have been phenomenal.
What does this all mean? According to Mr. Practical (and I've noted this as well), the stock markets have seized up and are being kept afloat by the unprecedented infusions of capital from central banks, who may, when this all unravels, face one of two conditions: 1. their own bankruptcy (highly probable in the US), or 2. Ownership of vast portfolios of stocks (the end of free markets).
Neither of these conditions is desirable. Worth noting is yesterday's move by the Senate Finance Committee to raise the debt limit to nearly $10 trillion. So, maybe the federal government will buy up most of Wall Street's troubled stocks with debt, sell it to China and thus avert a bloody war by allowing foreigners to take over all US assets without firing a single shot. That's a very nifty strategy by our nitwit Congress and sly fox administration, though overtly treasonous. They should all be in jail.
Interestingly, today's outsize market gains were led by two of the most debt-ridden companies on the planet, General Motors (GM) and Countrywide Financial (CFC). GM was up 10% on news that UAW president, Ron Gettelfinger, agrees in principle to the creation of a multibillion-dollar health-care trust fund. Countrywide was up 13% on news of another round of emergency funding, to the tune of $12 billion. Neither the names of the creditors nor the terms of the loan were disclosed.
Dow 13,424.88 +133.23; NASDAQ 2,601.06 +8.99; S&P 500 1,483.95 +12.39; NYSE Composite 9,678.12 +79.39
Technology, located mostly in the NASDAQ, lagged the market badly as the Dow Jones Industrials led the way. As large as the gains may have seemed, the breath of the market was rather thin. Advancers held a 5-4 margin over declining issues. New lows continued to lead new highs, 207-155. The fundamentals of this market still are not positive despite a couple of solid sessions this week.
Keeping some perspective, oil was up only 18 cents, though it cracked a new all-time high, closing at $80.09. The gold rally has stalled for the time being, with the yellow stuff down $2.80 to $717.90. Silver eased 11 cents to $12.68. If you're looking to bet on the metals, silver is well undervalued in relation to cousin gold, though price pressures from manufacturers could have some say in keeping the price down for now. It's still a very solid hedge position at current levels and I wouldn't chide anyone buying at any price under $13.25.
It also should be pointed out that trading was light on major exchanges. Key events to keep in mind are tomorrow's nationwide stand down by the Air Command and Tuesday's Fed meeting. There may be major news on the political front stemming from tensions in the Middle East, which have reached a boiling point not only on Capitol Hill, but throughout the region.
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