On Wednesday night, the United States Senate overwhelmingly passed (74-25) the massive $700+ billion bailout plan, similar to the one that was rejected by the House of Representatives on Monday.
The final bill before the Senate looked quite different from the House version. In addition to being 475 pages in length, the bill added a number of provisions for tax relief, various tax credits and outright pork barrel designed to induce specific House members to sign on to the measure.
Apparently, Wall Street was not impressed or was more concerned over an increase in initial unemployment claims (497K) and an enormous decrease in factory orders (-4.0%) for August. By contrast, July factory orders showed an increase of 0.7%.
Major US indices began the session lower and continued to decline throughout the day.
Dow 10,482.85 -348.22; NASDAQ 1,976.72 -92.68; S&P 500 1,114.28 -46.78; NYSE Composite 7,155.71 -364.24
With all the sweeteners in the bill, passage in the tumultuous House seems more certain, though rumblings remain among free market Republicans and now, so-called "Blue Dog" Democrats who may not readily sign on to legislation which increases spending without aligned taxes for which to pay the additional freight.
Meanwhile, European markets also were reeling from their own uncertainties in the banking sector The London interbank offered rate, or Libor, rose again, and the US commercial paper market plunged to a 3-year low.
Also on the minds of investors were yesterday's horrific auto sales reports for September which showed major auto makers suffering one the their worst months on record, an overall decline of 27% from a year ago. In addition to most new American cars and trucks being gas hogs and overpriced, a pullback in lending has left many would-be car buyers seeking alternatives.
On the day, declining issues once again outstripped advancers by a wide margin: 5313-1097. New lows continued to crush against new highs, 1031-17.
Volume was moderate, continuing to indicate what everybody already knows: there are hordes of cash sitting on the sidelines, waiting until either the congress passes (or doesn't pass) a bailout bill and/or the volatility is wrung out of the market and at least an interim bottom is put in place. At this point, nobody is holding his or her breath as the "crisis" drags onward.
NYSE Volume 1,463,072,000
NASDAQ Volume 2,212,399,000
Commodities continued a fascinating trade regimen. Oil dropped $4.56, to $96.97. Gold also fell by a whopping $43.00, to $844.30. Silver shed another $1.65 - a nearly 13% drop - to $11.12. The fall in the price of silver is historic, the largest one-day percentage decline ever.
While debate continues behind the scenes in the House, debate on Main Street and on the radio waves maintained a negative bent with most Americans deploring the current condition, expressing widespread distaste for the prospect of a $700+ billion bill which is still being seen as a bailout for rich Wall Street bankers and associated fat cats.
One really cannot argue with the US public on that note.
Thursday, October 2, 2008
Wednesday, October 1, 2008
Stocks Lower as Senate Prepares Vote; Soros Floats Alternative
The Dow recovered from a 200-point loss early on and finished moderately lower as prospects for a bailout or "rescue" (as John McCain prefers) bill improved overnight with key Senators vowing a vote on the measure Wednesday night.
A number of new elements have been tossed around the periphery of the plan that failed in the House on Monday, the best-received being a move to increase FDIC insurance to $250,000 on bank deposits, though that - and other suggestions - are merely cosmetic.
The bill still contains the fatal flaw of that gaudy $700 billion price tag, and senators in close races are sweating bullets over the largely unpopular measure. The compliant mainstream media has been instructed to push the "something must be done" mantra to the public, though many on Main Street are still resistant.
At the crux of the matter is all forms of credit being squeezed to the point at which the global financial system is nearly completely dried up. Libor rates (the percentage on money that banks lend to each other) have been extremely high, yesterday marking a record of 6.88% for overnight loans between banks. One-month loans are also high as banks have lost faith in other banks and are nearly refusing to lend. Around the globe, five banks have been rescued by governments and central banks this week alone.
While the Senate ponders its task ahead, conditions in Europe have reached crisis proportions as well. The EU has been promoting talks between mega-banking interests and, separately, leaders of the "Big Four" powers - Great Britain, France, Germany and Spain - in an ongoing effort to stave off more bank failures and a complete financial meltdown.
Adding to the mix is a proposal by billionaire investor George Soros, who made his case in a pair of editorials in the Financial Times, first on September 24, and most recently - and with clearer outlines for an alternative plan, on October 1.
The Senate vote is scheduled to begin around 9:00 pm. As of this writing, debate is underway.
Both presidential candidates returned to Washington for the vote. Here is the complete text of Barack Obama's speech on the Senate floor in support of passage. Senator McCain has also voiced support for the bailout package.
While the crisis drama intensified in Washington, Wall Street spent the day in a less volatile trading session.
Dow 10,831.07 -19.59; NASDAQ 2,069.40 -22.48; S&P 500 1,161.06 -5.30; NYSE Composite 7,519.95 -12.85
Declining issues held a slight edge over advancers, 3561-2769. New lows continued their domination over new highs, 406-24. Volume was moderate.
NYSE Volume 1,469,006,540
NASDAQ Volume 1,948,804,625
Commodities remained mixed. Oil was down again, losing $2.11, to $98.53. Gold rose $6.50, to $887.50. Silver rebounded as well, gaining 50 cents to $12.77.
Whatever occurs in Washington tonight and in the House of Representatives - who will revisit the issue on Friday - passage or rejection of the measure will have a dramatic impact on Wall Street. Whether this action, and that of our European counterparts, will manage to restore confidence to the ruined banking system is less clear.
A complete seizure of world economics would precipitate war, famine and generalized disaster to much of the world. America, being the world's most prosperous nation, will suffer the least by comparison. It is the poor and developing nations which will bear the brunt of the fallout from what can only be described as naked greed in financial circles.
It is because of that concept that many hold Wall Street financiers in contempt, wishing that they, among the richest men and women in the world, would share the same fate as those at the bottom of the economic system.
To that, one can only sympathize and hope for some shred of equality.
A number of new elements have been tossed around the periphery of the plan that failed in the House on Monday, the best-received being a move to increase FDIC insurance to $250,000 on bank deposits, though that - and other suggestions - are merely cosmetic.
The bill still contains the fatal flaw of that gaudy $700 billion price tag, and senators in close races are sweating bullets over the largely unpopular measure. The compliant mainstream media has been instructed to push the "something must be done" mantra to the public, though many on Main Street are still resistant.
At the crux of the matter is all forms of credit being squeezed to the point at which the global financial system is nearly completely dried up. Libor rates (the percentage on money that banks lend to each other) have been extremely high, yesterday marking a record of 6.88% for overnight loans between banks. One-month loans are also high as banks have lost faith in other banks and are nearly refusing to lend. Around the globe, five banks have been rescued by governments and central banks this week alone.
While the Senate ponders its task ahead, conditions in Europe have reached crisis proportions as well. The EU has been promoting talks between mega-banking interests and, separately, leaders of the "Big Four" powers - Great Britain, France, Germany and Spain - in an ongoing effort to stave off more bank failures and a complete financial meltdown.
Adding to the mix is a proposal by billionaire investor George Soros, who made his case in a pair of editorials in the Financial Times, first on September 24, and most recently - and with clearer outlines for an alternative plan, on October 1.
The Senate vote is scheduled to begin around 9:00 pm. As of this writing, debate is underway.
Both presidential candidates returned to Washington for the vote. Here is the complete text of Barack Obama's speech on the Senate floor in support of passage. Senator McCain has also voiced support for the bailout package.
While the crisis drama intensified in Washington, Wall Street spent the day in a less volatile trading session.
Dow 10,831.07 -19.59; NASDAQ 2,069.40 -22.48; S&P 500 1,161.06 -5.30; NYSE Composite 7,519.95 -12.85
Declining issues held a slight edge over advancers, 3561-2769. New lows continued their domination over new highs, 406-24. Volume was moderate.
NYSE Volume 1,469,006,540
NASDAQ Volume 1,948,804,625
Commodities remained mixed. Oil was down again, losing $2.11, to $98.53. Gold rose $6.50, to $887.50. Silver rebounded as well, gaining 50 cents to $12.77.
Whatever occurs in Washington tonight and in the House of Representatives - who will revisit the issue on Friday - passage or rejection of the measure will have a dramatic impact on Wall Street. Whether this action, and that of our European counterparts, will manage to restore confidence to the ruined banking system is less clear.
A complete seizure of world economics would precipitate war, famine and generalized disaster to much of the world. America, being the world's most prosperous nation, will suffer the least by comparison. It is the poor and developing nations which will bear the brunt of the fallout from what can only be described as naked greed in financial circles.
It is because of that concept that many hold Wall Street financiers in contempt, wishing that they, among the richest men and women in the world, would share the same fate as those at the bottom of the economic system.
To that, one can only sympathize and hope for some shred of equality.
Tuesday, September 30, 2008
Filtering Through the Noise: Markets Rally After Worst Day
The US stock markets are volatile enough to drive a sober man to drink. Of course, adroit options players are having a field day on the wild swings with naked straddles and bets one way or the other.
But the noise has to be filtered out and I found an exceptional article on cnn.com by economist Jeffrey Miron which expresses a belief that bankruptcy, not bailout, is the correct solution, something that's been opined ad nauseum on this blog.
The American public made it unquestionably clear that they opposed a massive taxpayer-funded bailout of failed financial institutions. Congress, as of yesterday, apparently got the message, sending the measure down to defeat, but somehow, hundreds of thousands of phone calls and emails from everyday citizens can't keep the morons on Capitol Hill from trying again.
So, today, one day after the largest single-day point decline in the history of the Dow Jones Industrials, investors were busily picking up the broken pieces - by the handfuls. All indices were up sharply from the outset and finished by recovering more than half of Monday's declines. The conventional wisdom says that congress is still going to produce some kind of bailout bill, so investing is still a safe game.
My opinion, and that of others who see this entire "sky is falling" scenario as little more than political posturing and craftiness, is that the real players in the market found incredible gems at unbelievably low prices on Tuesday.
Dow 10,850.66 +485.21; NASDAQ 2,082.33 +98.60; S&P 500 1,164.74 +58.35; NYSE Composite 7,532.92 +328.91
Essentially, the markets are going to gyrate until the congress goes on recess, with or without a bill. What's clear is that, to many lawmakers, winning re-election is likely more important than "saving" the economy. This is more about politics than money, but the politicians and Wall Street schemers - Treasury Secretary Paulson chief amongst them - are playing with $700 billion, the US economy and the free market.
I'll not pretend to have a crystal ball, but reiterate that Wall Street needs to take its medicine and congress needs to go on vacation, as previously planned, without passing anything. Take the posturing and fake sincerity back to your states and districts. See how it plays in Peoria.
One possible bit of arsenic in the broth could be this: hedge funds are expecting a flood of redemptions or cash-outs after they report results for September. So far, it doesn't seem to be any more troubling than what we've already witnessed so far this year and is probably more a canard than a canary in the mine shaft.
On the day, advancing issues far exceeded decliners, 4653-1795. New lows outweighed new highs, 602-22, a margin befitting the absurdity of the current condition. Market volume was moderate.
NYSE Volume 1,599,455,000
NASDAQ Volume 2,387,042,000
Oil finished the day with a gain of $4.27, at $100.64. Gold closed down on the day, at $880.80, losing $13.60. Silver also offered no safe haven, dropping 75 cents to $12.28.
Is it just me, or is the feeling that the storm has pretty much passed becoming more and more prevalent? Checking Fibonacci numbers and a variety of charts and indicators, we should be nearing a bottom in stocks. The major indices are already off 25% or more from a year ago, so how much further can they go? The largest failures have likely already occurred. The "economic tsunami" being predicted by politicians and the media may be more smoke and mirrors and scare mongering than reality.
But the noise has to be filtered out and I found an exceptional article on cnn.com by economist Jeffrey Miron which expresses a belief that bankruptcy, not bailout, is the correct solution, something that's been opined ad nauseum on this blog.
The American public made it unquestionably clear that they opposed a massive taxpayer-funded bailout of failed financial institutions. Congress, as of yesterday, apparently got the message, sending the measure down to defeat, but somehow, hundreds of thousands of phone calls and emails from everyday citizens can't keep the morons on Capitol Hill from trying again.
So, today, one day after the largest single-day point decline in the history of the Dow Jones Industrials, investors were busily picking up the broken pieces - by the handfuls. All indices were up sharply from the outset and finished by recovering more than half of Monday's declines. The conventional wisdom says that congress is still going to produce some kind of bailout bill, so investing is still a safe game.
My opinion, and that of others who see this entire "sky is falling" scenario as little more than political posturing and craftiness, is that the real players in the market found incredible gems at unbelievably low prices on Tuesday.
Dow 10,850.66 +485.21; NASDAQ 2,082.33 +98.60; S&P 500 1,164.74 +58.35; NYSE Composite 7,532.92 +328.91
Essentially, the markets are going to gyrate until the congress goes on recess, with or without a bill. What's clear is that, to many lawmakers, winning re-election is likely more important than "saving" the economy. This is more about politics than money, but the politicians and Wall Street schemers - Treasury Secretary Paulson chief amongst them - are playing with $700 billion, the US economy and the free market.
I'll not pretend to have a crystal ball, but reiterate that Wall Street needs to take its medicine and congress needs to go on vacation, as previously planned, without passing anything. Take the posturing and fake sincerity back to your states and districts. See how it plays in Peoria.
One possible bit of arsenic in the broth could be this: hedge funds are expecting a flood of redemptions or cash-outs after they report results for September. So far, it doesn't seem to be any more troubling than what we've already witnessed so far this year and is probably more a canard than a canary in the mine shaft.
On the day, advancing issues far exceeded decliners, 4653-1795. New lows outweighed new highs, 602-22, a margin befitting the absurdity of the current condition. Market volume was moderate.
NYSE Volume 1,599,455,000
NASDAQ Volume 2,387,042,000
Oil finished the day with a gain of $4.27, at $100.64. Gold closed down on the day, at $880.80, losing $13.60. Silver also offered no safe haven, dropping 75 cents to $12.28.
Is it just me, or is the feeling that the storm has pretty much passed becoming more and more prevalent? Checking Fibonacci numbers and a variety of charts and indicators, we should be nearing a bottom in stocks. The major indices are already off 25% or more from a year ago, so how much further can they go? The largest failures have likely already occurred. The "economic tsunami" being predicted by politicians and the media may be more smoke and mirrors and scare mongering than reality.
Monday, September 29, 2008
As Wall Street Tumbles, Main Street Cheers
With the ill-advise and hastily-prepared Emergency Economic Stabilization Act of 2008 failing in the House of Representatives, conservatives and liberal alike are cheering the 228 members who voted against the measure.
The actual votes cast by each member of the House can be seen here.
Failing largely along party lines, the measure now seems doomed to permanent defeat even though stocks - particularly those in the financial sector - have suffered one of their worst days of all time.
Repeatedly told that the entire US and global financial system was at risk, especially by President Bush, Treasury Secretary Paulson and congressional leaders of the Democratic party, the stock market seems to have fulfilled the prophecy.
Dow 10,365.45 -777.68 (6.98%); NASDAQ 1,983.73 -199.61 (9.14%); S&P 500 1,107.06 -105.95 (8.73%) NYSE Composite 7,207.02 Down 683.35 (8.66%)
What has never been fully explained is just how the economy would be brought to its knees. With catch-phrases of "frozen credit markets" and "failing institutions" being tossed about for at least the prior two weeks, the actual fallout at the close of trading today is spectacular, but in no way catastrophic.
In fact, compared to the closing lows of Wednesday, September 17, the Dow is only 244 points lower. On that day, a day before Paulson announced consideration of the "bailout" plan, the Dow closed at 10,609.66. The NASDAQ, which suffered the worst percentage loss today, finished at 2098.85 and the S&P closed at 1156.39 on the 17th.
So, in retrospect, the declines of Monday, September 29, when viewed in a larger perspective, were not all that incredible. Wall Street thought they were going to get a free lunch courtesy of the US taxpayer and had bid themselves back upwards. Once the free money was swept away by the House of Representatives, they expressed their anger by selling, even though today's sell-off was far from a panic. In fact, the Dow's decline over the last 8 days of trading is less than 3%.
Let the bargain hunting begin.
The day was largely a rout, however, with declining issues outnumbering advancers, 5897-619 and new lows trouncing new highs, 1740-39.
Volume was heavy, but especially so in the final 1 1/2 hours of trading, after the House defeated the bailout measure.
NYSE Volume 1,969,514,000
NASDAQ Volume 2,843,311,000
Oil took a significant hit, down $10.52, to $96.37. Gold gained just $5.90, to $894.40, while silver actually lost 48 cents, closing at $13.03.
This aberrant behavior in the commodities markets confirms that the financial underpinnings are not endangered, though the potential for a serious deflationary spiral continue to form in the background.
As I've been saying here for at least the past three months and probably longer, deflation is the real issue. For some, especially businesses trying to keep prices stable, this is troubling. For consumers and small business, however, a spate of deflation is welcome, as small merchants and companies are better prepared to adjust pricing "on the fly" so to speak.
What is occurring could be considered the beginning of an American - and to a larger extent, global - Renaissance, in which the excesses of Wall Street are replaced by innovation and the micro-economics of local and middle-class commerce, which is less orderly, though eminently more egalitarian.
Wall Street may be suffering through one of the worst periods in its long and highly-checkered history of booms and busts. In the long run, though, Main Street and the US consumer may become the ultimate victor.
The actual votes cast by each member of the House can be seen here.
Failing largely along party lines, the measure now seems doomed to permanent defeat even though stocks - particularly those in the financial sector - have suffered one of their worst days of all time.
Repeatedly told that the entire US and global financial system was at risk, especially by President Bush, Treasury Secretary Paulson and congressional leaders of the Democratic party, the stock market seems to have fulfilled the prophecy.
Dow 10,365.45 -777.68 (6.98%); NASDAQ 1,983.73 -199.61 (9.14%); S&P 500 1,107.06 -105.95 (8.73%) NYSE Composite 7,207.02 Down 683.35 (8.66%)
What has never been fully explained is just how the economy would be brought to its knees. With catch-phrases of "frozen credit markets" and "failing institutions" being tossed about for at least the prior two weeks, the actual fallout at the close of trading today is spectacular, but in no way catastrophic.
In fact, compared to the closing lows of Wednesday, September 17, the Dow is only 244 points lower. On that day, a day before Paulson announced consideration of the "bailout" plan, the Dow closed at 10,609.66. The NASDAQ, which suffered the worst percentage loss today, finished at 2098.85 and the S&P closed at 1156.39 on the 17th.
So, in retrospect, the declines of Monday, September 29, when viewed in a larger perspective, were not all that incredible. Wall Street thought they were going to get a free lunch courtesy of the US taxpayer and had bid themselves back upwards. Once the free money was swept away by the House of Representatives, they expressed their anger by selling, even though today's sell-off was far from a panic. In fact, the Dow's decline over the last 8 days of trading is less than 3%.
Let the bargain hunting begin.
The day was largely a rout, however, with declining issues outnumbering advancers, 5897-619 and new lows trouncing new highs, 1740-39.
Volume was heavy, but especially so in the final 1 1/2 hours of trading, after the House defeated the bailout measure.
NYSE Volume 1,969,514,000
NASDAQ Volume 2,843,311,000
Oil took a significant hit, down $10.52, to $96.37. Gold gained just $5.90, to $894.40, while silver actually lost 48 cents, closing at $13.03.
This aberrant behavior in the commodities markets confirms that the financial underpinnings are not endangered, though the potential for a serious deflationary spiral continue to form in the background.
As I've been saying here for at least the past three months and probably longer, deflation is the real issue. For some, especially businesses trying to keep prices stable, this is troubling. For consumers and small business, however, a spate of deflation is welcome, as small merchants and companies are better prepared to adjust pricing "on the fly" so to speak.
What is occurring could be considered the beginning of an American - and to a larger extent, global - Renaissance, in which the excesses of Wall Street are replaced by innovation and the micro-economics of local and middle-class commerce, which is less orderly, though eminently more egalitarian.
Wall Street may be suffering through one of the worst periods in its long and highly-checkered history of booms and busts. In the long run, though, Main Street and the US consumer may become the ultimate victor.
House Votes Down Bailout, Saves America
The House of Representatives, for once heeding the overwhelming voice of the public, voted down the massive $700 billion bailout of Wall Street banking interests.
By a vote of 228-205, the Emergency Economic Stabilization Act of 2008 bill was defeated across party lines, with rank-and-file Democrats and Republicans defeating the measure.
As expected, Wall Street reacted with shock and horror. The Dow Jones Industrials, already down 300 points, briefly dropped as much as 700 points before recovering somewhat. At this writing, the Dow is down 450 points. The NASDAQ is down roughly 125 points as Wall Street heads towards the close of the session.
It was obvious this morning that the authors of the bill - the administration and Treasury Secretary Henry Paulson, along with Democratic party leaders - did not have enough votes to pass the measure. The vote on the bill was delayed into the early afternoon, but once brought to a vote, the measure was soundly defeated.
It is unclear whether reconsideration will occur.
For the time being, the measure is dead. Now all the American people have to do is convince congress to recess, leave Washington and go back to their districts until the election is over. All members of the House of Representatives face reelection this year.
By a vote of 228-205, the Emergency Economic Stabilization Act of 2008 bill was defeated across party lines, with rank-and-file Democrats and Republicans defeating the measure.
As expected, Wall Street reacted with shock and horror. The Dow Jones Industrials, already down 300 points, briefly dropped as much as 700 points before recovering somewhat. At this writing, the Dow is down 450 points. The NASDAQ is down roughly 125 points as Wall Street heads towards the close of the session.
It was obvious this morning that the authors of the bill - the administration and Treasury Secretary Henry Paulson, along with Democratic party leaders - did not have enough votes to pass the measure. The vote on the bill was delayed into the early afternoon, but once brought to a vote, the measure was soundly defeated.
It is unclear whether reconsideration will occur.
For the time being, the measure is dead. Now all the American people have to do is convince congress to recess, leave Washington and go back to their districts until the election is over. All members of the House of Representatives face reelection this year.
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