Oops, They Did It Again

Broken record. Drop. Skip. Drop. Skip. Drop. Skip.

If you haven't bailed out of your long - and likely losing - positions by now, there's still time to limit your losses. The stock markets continue to fall, day by day, lower and lower. It's plain that there are problems with the economy, with stocks, with investments, and you don't want to be stuck holding the bag.

Dow 12,987.30 -55.44; NASDAQ 2,584.13 -43.81; S&P 500 1,439.18 -14.52; NYSE Composite 9,570.04 Down 163.30

The Dow careened through the 13,000 mark late today. Apparently, the PPT has given up attempting to fly the market higher into the close. They now prefer mid-day propping instead, as the Dow was at one point 100 points to the good, but it could not hold gains.

To illustrate the depth and breadth of the selling, declining issues overwhelmed advancers by 3894-1377. New lows trampled new highs, XX-XX. The NYSE Composite, the broadest measure of mainstream stocks and one of the least-watched, has lost 740 points since October 31, a span of just 8 sessions.

What's almost a certainty at this juncture is that the Dow will retest the August lows of 12,800, possibly as early as this week. Tomorrow, pending home sales for September will be released at 10:00 am, and the numbers are not likely to be encouraging. As the week rolls on, PPI, CPI, Industrial Production and Capacity Utilization reports flow into the market. With earnings season pretty much behind this market, though Home Depot (HD) and Wal-Mart (WMT) report Tuesday prior to the open, economic reports will be market-movers.

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Oil slipped $1.70 to close at $94.62. Apparently, there was another round of debts being called or heavy profit-taking as gold dropped an enormous $27.00, ending the day at $807.70. Silver also declined 78 cents to $14.76. I say there was a credit crunch because this is precisely what happened one day in August, when everybody rushed to raised cash - they sold gold. Panic selling of assets is endemic to this environment.

Panic selling of stocks might actually be a virtuous undertaking here since there are better places for money - like in a sock or tucked under a mattress - than sending them down the black hole on Wall Street.

I close today with a tribute to all veterans, and one very special one, my father, Nick Gagliano, who served in the Army in WWII and fought in the Battle of the Bulge. I salute you all and thank you for your service. God Bless America.

NYSE Volume 3,749,867,750
NASDAQ Volume 2,732,693,250

Correction? Close Enough!

Wednesday night on the CBS Evening News, Katie Couric, no financial wunderkind herself, posed the question of whether the market was in a correction to one of her crack business reporters. The answer was, "no, not yet," as though the magic 10% figure would send some all clear signal for investors to resume buying stocks.

While we are not technically in a correction - which is a 10% decline in the market - we are certainly close. From the high of 14,280 (intraday) on the Dow, a correction would necessitate a loss of 1,428 points. At the close today, the Dow has only lost 1,237 points, or roughly 9%. What makes the argument all the more interesting, is that the Dow - and most other major indices - dropped significant amounts at the close and ended near the lows of the day. The Dow itself, in an unusual reversal of fortune, lost over 150 points in the final 40 minutes of trading.

Dow 13,042.74 -223.55; NASDAQ 2,627.94 -68.06; S&P 500 1,453.70 -21.07; NYSE Composite 9,733.34 Down 144.13

In case you haven't gotten the memo, owning stocks this week was not in your best interests.

For points of reference, let's just take this month. Since October 31 the Dow has dropped nearly 900 points. The NASDAQ lost 232 points over the same span. It's not very pretty, and the culprits are the same: sub-prime mortgages, credit disruptions, falling dollar, higher oil.

The US economy is pretty much kaput. We've binged for too long and now it's time to pay the piper. I reiterate my statement that bank failures are a distinct possibility. And not just any bank, banks like Citibank, Bank of America, Chase, and others are on the hook for literally hundreds of billions in bad loans. That is exacerbating the credit crunch. Banks are just not loaning out any money unless your credit is absolutely perfect. They've been burned - by themselves - and they're scared stiff. So should you be.

Advancing issues were overwhelmed by decliners by a 5-2 margin and new lows continued to ratchet up to 742, while new highs sunk to a 3 1/2-month low of 85. There aren't a lot of success stories out there. If your holdings managed only a 5% loss since August, consider yourself either smart or lucky. However, this is only the first leg down. We haven't even sunk to the August lows (12,800 on the Dow) yet, though we're closing in on them quickly.

Commodities were mixed. Oil ended the week at the absurd level of $96.32 per barrel, ahead 86 cents on Friday. Gold lost $2.80 to $834.70, while silver gained 3 cents to $15.55. It wasn't a month ago that I said silver was a buy at under $13.50. Boy, was I right!

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There may be a technical bounce next week, as stocks have taken quite a hit over the past seven sessions and are oversold. Don't be a bargain hunter here, though, as gains will be quickly wiped out before Christmas. There's an equal possibility that the selling will continue, though, without much of a respite. Monday, in particular, could be a bloodbath.

Volume was high once again. Even the not-so-smart money is getting out of US stocks. If you haven't already, it's still not too late.

NYSE Volume 4,587,501,500
NASDAQ Volume 3,004,066,500

I See a Bottom

Actually, that's what somebody posted on a message board about 3:15 pm this afternoon. That was before the Dow dropped another 150 points into the close.

I don't see a bottom. Maybe in three to six months my powers of prognostication will be improved, but the next stop is somewhere in the range of 12,800 on the Dow - the August lows. And it probably isn't going to stop there.

Today's US equity markets were roiled by a massive, $39 billion 3rd quarter loss by General Motors, spiking oil prices (why wasn't the market tanking when oil hit $75, or $85?) and continued deterioration in the credit markets.

There's a lot of talk these days about the credit markets. Let's be clear. Banks are in deep, deep trouble and they aren't about to lend money to just anyone. If you're an individual, you need absolutely perfect credit. Companies need AAA ratings, loads of solid repayment history and still they're going to pay through the teeth. It's very tight and scary in financial markets right now. There is talk not only of recession, but depression, though we're still far removed from that possibility at this juncture.

Fortunately, there will be more signs - ominous though they may be - before banks begin to fail. Small businesses will close first because they are the most prone to catastrophe in economic downturns. That would happen on a regional basis, most likely in smaller communities. Of course, the level of personal bankruptcies is already alarming.

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Next, larger firms would go belly up. Mostly, those would be private concerns, which is why the boom to "take private" public companies has been suddenly and irrevocably reversed course. There is no M&A activity to speak of. When public companies go under, then the handwriting is already on the wall, so, if you take a look at some of the mortgage firms and hedge fund operations which have gone under recently, it looks like we're quite a bit closer to economic meltdown than the ordinary, uninformed citizen would assume. And we probably are.

Dow 13,300.02 -360.92; NASDAQ 2,748.76 -76.42; S&P 500 1,475.62 -44.65; NYSE Composite 9,830.15 -272.26

There have been 13 days this year in which the Dow lost 200 or more points. 11 of them have occurred within the last 4 months. Today was the 5th worst decline of the year. Obviously, we are not living in an economic utopia.

If we're headed for a recession, or even a prolonged depression, how do we get out of it? First, it should be understood that some will fare better than others. Some entire communities will barely feel the effects. Others will be devastated. The poor and the lower levels of the middle class will be hardest hit. Some say they have already been hit. How we get out of financial distress depends on the wisdom and actions of our elected officials, which, considering the current crop, means we're pretty much screwed.

Anybody who has money invested in the stock markets, in mutual funds, retirement accounts, IRAs, etc. is going to feel a great deal poorer a year from now. That's almost a certitude. But, we do have a financial infrastructure that is deeply-rooted in government employment. Teachers, postal workers, public works workers will not see any declines in their rates of pay.

But the private sector can only survive if it is itself vibrant and growing. It is not. If you work for anyone other than a government entity, you'd be wise to prepare for the worst because the stock market is telling you, loud and clear, that it's coming. And it's not going to relent. The level of economic destruction about to be unleashed upon the United States of America will be unprecedented unless - again - our elected leaders take action that is sound and correct and broad-based.

The initial actions taken by the Federal Reserve, of lowing interest rates, has been a disastrous beginning. Rates should be raised to reflect the realities of the marketplace. Money should be tight. It should be well-guarded and every dollar respected. The Fed has sent exactly the wrong message so far, but that's what we get from a central bank that fomented the largest credit expansion in the history of the world and a government that cannot restrain itself from overspending.

Back to today's market. The 5,500 declining issues dwarfed the 897 advancers. New lows ravaged new highs, 776-203.

Oil actually took a breather, losing some 33 cents to close at $96.37. That price is artificially high, unsustainable, illusory and about 30-40 dollars too high. It's a price that will bankrupt entire nations.

Gold closed at an all-time high of $833.50 with no end in sight. Silver took a little off the top after a massive run-up, losing 6 cents to $15.33.

We're all in for a world of hurt and the blame can be firmly placed on the elected "leaders" in Washington and the corrupt media and their selective reportage. They - except for a chosen few - are no better than common crooks and they have traded on the nation's wealth to enrich themselves. May they all burn in hell for what they have wrought.

NYSE Volume 4,301,055,000
NASDAQ Volume 2,561,720,500

The Quiet Rally

There was no hoopla, no blockbuster story. No, there was little more than a murmur over the outsize gains in US equities today. Strange.

Dow 13,660.94 +117.54; NASDAQ 2,825.18 +30.00; S&P 500 1,520.27 +18.10; NYSE Composite 10,102.41 +143.59

The major averages gained in the range of 1% - usually an occasion for cheering - but the only sound was that of one hand clapping, as the price of oil grabbed headlines once again. Crude was the news, as a barrel of the slippery stuff went for $96.70 at the close of trading at the NY Mercantile Exchange, a gain of $2.72 over the previous day.

Oil at nearly $100 a barrel would normally cause markets to reel in terror, but this is no ordinary market here in the good old US of A, this is a market that's been held in abeyance by the dual forces of sub-prime mortgage fallout and a related crippling credit crisis.

So, it was a surprise to many that stocks did so well today. Well, some stocks. As expected, ExxonMobil (XOM) was the big winner on the Dow, gaining 2.72 to 90.38 at the close. 23 of 30 Dow components were in the green.

On the broader exchanges, advancing issues beat decliners by a 13-8 margin, though new lows continued to hold sway over new highs, 536-276. That's not a good sign, for now, though the margin is better than it was yesterday.

But the market gains were not embraced by investors. Rather there was an uneasy skepticism, especially since the markets creaked eerily into the red just after 11:00 am. After that, though, it was all uphill, for the rest of the day, especially in the final hour, when the Dow tacked on 70 points into the close, with heavy buying in the final few minutes. It was an oddly quiet day for such a dramatic rise.

Were it simple to discern the behind-the-scene activities of the Fed, the Treasury, the serendipitous PPT, the brokers, dealers and underwriters, this game would be to easy. But there was no driver today, no mover, no shaker. Just buying for the sake of buying.

Maybe people were just tired of selling. One would expect an urge to sell stocks might appear sooner rather than later, as the markets have been stuck in a range for some time now, and the downside still makes more sense than new highs.

The gains in gold (+13.00, $823.80) and silver (+0.60, $15.38) were also outlandish and indicative of the crumbling status of the dollar.

US stocks are surely struggling, but today served notice that without direction, people still have some degree of faith.

NYSE Volume 3,893,849,000
NASDAQ Volume 2,545,161,000

Wall Street's Ponzi Scheme Blowing Up

What's really going on with Wall Street?

We keep hearing news that the economy is OK, but then, a day later, there's more disturbing data from the housing sector, or some consumer confidence poll. GDP is strong (+3.9% in the 3rd quarter), labor markets are solid, but stocks seem to be dawdling along and November is usually a good month.

The bottom line truth is that nobody really knows, or those who do aren't saying, and matters were made muddier last week when the Fed lowered the federal funds rate, then more sub-prime fallout at CitiGroup, then stocks took a nosedive without warning.

On Monday, it looked like a meltdown in progress right out of the gate, then a slight recovery, another slump and a recovery into the close. Same old broken record with this kicker, Fed Governor Frederic Mishkin spoke extensively on the economy and the Fed, saying that the recent cuts could be reversed.

How about that monkey wrench? How would Wall Street react to a 25 basis point increase after celebrating the last two cuts of a combined 75 basis points. If you want to see turmoil, just wait and see.

Dow 13,543.40 -51.70; NASDAQ 2,795.18 -15.20; S&P 500 1,502.17 -7.48; NYSE Composite 9,958.82 Down 93.44

The internals shed more light. Today's decline was more broad-based than most other run-of-the-mill -50 point declines on the Dow. Declining issues led advancers by a nearly 3-1 margin. New lows continued to dominate new highs, 633-165. That's a pretty large gap and signals again that the market is in for more downside pressure.

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The selling pressure is coming from everywhere because stocks have been so magnificently overvalued while returns from the 3rd quarter were shoddy in most sectors.

Gas prices took another huge rise over the weekend, up nearly 12 cents in most areas. Naturally, this has much to do with politics in the Middle East, especially with Pakistan now under what amounts to martial law. What's interesting is that Western democracies are more concerned than Pakistanis themselves, by and large, probably because most Pakistanis aren't accustomed to real democratic rights, they've only recently experienced some of them.

The price of crude actually eased off a bit on Monday, dropping $1.95 to $93.98, which is really not any kind of relief. Meanwhile, gold gained another $2.30, to $810.80 and silver priced 19 cents higher to $14.79.

So, what's really the matter? I continue to hold to the theory that credit markets are frozen, lots of money is being lost on a daily basis, there are no merger and acquisition deals going forward and companies are paying with their eyeteeth for expansion funding. Private equity deals, all the rage over the past few years, are about to blow up in the faces of the funders and bank failures are not far in the future.

While the day-to-day wheels of industry grind on, wealth is no longer being created, but rather destroyed in a vicious cycle of bad loans, tight credit, a falling dollar and excessive pricing in energy. It's an absolute mess that has no other final resolution but a massive re-valuation of just about everything, including stocks, and that means we're going to be stuck in a bear market for some time to come.

Sentiment is turning from unsure to surely ugly and price gains are going to be few and far between. Tech is still the best bet, but only in companies with solid balance sheets and earnings that are growing and are predicted to continue doing so.

I reiterate, anything exposed to finance, banking or money is going to get crushed over the next six to nine months. And when the fall comes to the banking sector, the layoffs in that sector and everywhere else are going to be mammoth. A recession should be a foregone conclusion as government figures have proven, over and over again, to be unreliable and untrustworthy.

If the sub-prime disease that has crushed the credit markets continues unabated - and it will - the effects to the general economy will be long-lasting and severe. Believe whomever you like, but from this corner, the massive Wall Street Ponzi scheme seems to be headed for a watershed event.

NYSE Volume 3,819,302,500
NASDAQ Volume 2,147,749,000