Stocks continued their decline on Wednesday, a pattern that is retracing the meteoric rise from October 27 to November 4, which saw the Dow rise by 1450 points in just six sessions. At the close today, the Dow has erased all but 107 points of that gain - all in just another six sessions.
Volatility, anyone?
What's occurring in the markets is simply the readjustment that comes after decades of credit creation and now, the resulting collapse of the economic forces that find the increased money flows to be unsustainable.
Over the past 20 years, the US, and to a larger part, the world, economy was blown out of proportion by easy money via various central banking maneuvers. Now, those same central bankers are scrambling to keep the level of money flow intact (impossible) and the conditional economies on a growth path (also impossible).
The natural development of a monetary implosion which we are now witnessing is probably something to be very afraid of, if you are on a career path, have a high-income job (or any kind of job for that matter), or have investments in stocks that were earmarked for retirement, college or some future planned event.
Your money is quickly evaporating before your eyes while central bankers continue to create money out of thin air which is also predestined to evaporate. We are now in the second phase of an historic market crash - in slow motion - where investors re-evaluate all positions and asset values continue to decline. And they will continue to decline for some time, until world governments discontinue their meddling in what used to be free markets.
If, on the other hand, you are poor, but without any severe debt or health issues, you will be comparatively better off if only because everything - from gas to clothes to cars to food to housing - will continue to become more and more affordable, assuming, of course, that your pittance of a salary or income remains the same.
Dow 8,282.66 -411.30; NASDAQ 1,499.21 -81.69; S&P 500 852.30 -46.65; NYSE Composite 5,320.70 -313.67
Call it what you will, this recession, depression, adjustment is going to last longer than anyone - including myself - had planned. Some otherwise sensible economists are calling for improvement by the second half of 2009, or, in other words, a year from now. That's being overly optimistic, in my view. The extent of the damage from fast money - both in its easy credit form and now the rapid disappearing of same - is likely to be more severe than almost anybody can imagine.
On the day, stocks were hammered across the board. Declining issues beat out advancers by the widest margin of the week (and Monday and Tuesday were fairly large gaps), 5754-735, an 8-1 ratio. New lows expanded the distance between themselves and new highs to 1120-11. All this data is telling us that the retest of the October 27 lows are on pace and continuing.
Volume increased slightly, for the second straight day, setting up for more declines on higher volume as the week winds down.
NYSE Volume 1,455,420,000
NASDAQ Volume 2,184,735,000
Commodities took another turn for the worse, as they should, keeping in line with the general theme of declining asset values. Crude oil for December delivery fell another 5%, by $3.17, to a two-year low of $56.16. Gold lost $14.50, to $718.30 and silver dropped 33 cents to $9.48.
Outgoing Treasury Secretary Paulson made some statements today which confirmed that he has had and continues to have no clue of what he is doing or has already done.
This statement, ""And to adequately reform our system, we must make sure we fully understand the nature of the problem which will not be possible until we are confident it is behind us," says it all.
That $750 billion bailout, or TARP, as those on Capitol Hill like to call it, is a complete and utter failure thus far. As many already understand, throwing more money at failing or already failed institutions or businesses just exacerbates the problem by rewarding bad behavior.
Free markets require free thinking and the freedom of markets to destroy businesses which are no longer necessary, competitive or otherwise functional. Government meddling will only make matters worse, which we're about to find out, again.
Wednesday, November 12, 2008
Tuesday, November 11, 2008
Race to the Bottom
Stocks continued on their inexorable grind back towards recent lows on Tuesday, sending the major indices to their fourth loss in the last five sessions. Only a mid-afternoon rally kept stocks from sinking even further.
The day didn't offer any huge surprises, just the usual assortment of downbeat economic news and jitters over the rapid decline in consumer spending. The good news - if it can be called that - is that retailers are offering unprecedented pre-holiday discounts on everything from socks to CDs following unusually soft spending in October.
Dow 8,693.96 -176.58; NASDAQ 1,580.90 -35.84; S&P 500 898.95 -20.26; NYSE Composite 5,634.37 -167.68
On the day, declining issues outpaced advancers by a widening margin, 5001-1395. New lows continued their domination over new highs, also by a growing margin, 700-15. Both of those data sets indicate that the market is still fundamentally weak and subject to further downdrafts. Without a solid bottom in place, stock could continue to languish for some time. Volume was moderate, a little better than Monday, but nothing to either dissuade or encourage investors.
NYSE Volume 1,226,731,000
NASDAQ Volume 1,935,806,000
Oil took another hit on Tuesday, losing $3.08, to $59.33. It was the first time oil has closed below $60 on the NYMerc in nearly two years. The metals followed the trend, with gold down $13.70, to $732.80, and silver losing 42 cents to $9.81. As has been mentioned numerous times here, everything is going to get cheaper. The trick, for most Americans, is to hold onto whatever job they may have and seek out bargains for essentials.
While retailers are likely to have a very poor holiday season, individuals and families, for the most part, will enjoy a somewhat sober season and gifts that won't put a dent in their budgets. Those who have ready cash should fare quite well during the downturn, with their fortunes improving the longer the slump continues.
There was some news in the banking sector as Citigroup announced a plan to keep people in their homes, canceling foreclosure plans via mortgage modifications for roughly 500,000 home owners. American Express received approval to become a commercial bank, which will allow it to tap into short-term loans (and maybe a bite or two from the bailout brunch) from the Federal Reserve.
How hard one is affected by economic conditions will vary widely by region and employment. The Northeast seems to be the least affected, as the mortgage meltdown was largely an event outside the region. People in the West, South and Midwest are going to suffer the most, as incomes stagnate, jobs disappear and the fallout from collapsing home prices brings down everything around it.
One thing is becoming more and more clear by the day. The weight of this recession is not going to end with the consumer, but with state and local governments, which are being forced into nearly illiquid circumstances as property tax bases shrink along with all other forms of revenue, especially income and sales taxes. The likelihood of mass layoffs of municipal employees becomes greater with each passing day. Widespread layoffs of public employees could, in fact, turn this recession into a long-lasting depression with unemployment hovering between 12 and 15% of the work force and continued sluggishness throughout the economy.
As the cold winds begin to blow across much of the nation, the feeling is that there's little to stop the surging wave of layoffs, spending cuts and morbid economic circumstances.
The day didn't offer any huge surprises, just the usual assortment of downbeat economic news and jitters over the rapid decline in consumer spending. The good news - if it can be called that - is that retailers are offering unprecedented pre-holiday discounts on everything from socks to CDs following unusually soft spending in October.
Dow 8,693.96 -176.58; NASDAQ 1,580.90 -35.84; S&P 500 898.95 -20.26; NYSE Composite 5,634.37 -167.68
On the day, declining issues outpaced advancers by a widening margin, 5001-1395. New lows continued their domination over new highs, also by a growing margin, 700-15. Both of those data sets indicate that the market is still fundamentally weak and subject to further downdrafts. Without a solid bottom in place, stock could continue to languish for some time. Volume was moderate, a little better than Monday, but nothing to either dissuade or encourage investors.
NYSE Volume 1,226,731,000
NASDAQ Volume 1,935,806,000
Oil took another hit on Tuesday, losing $3.08, to $59.33. It was the first time oil has closed below $60 on the NYMerc in nearly two years. The metals followed the trend, with gold down $13.70, to $732.80, and silver losing 42 cents to $9.81. As has been mentioned numerous times here, everything is going to get cheaper. The trick, for most Americans, is to hold onto whatever job they may have and seek out bargains for essentials.
While retailers are likely to have a very poor holiday season, individuals and families, for the most part, will enjoy a somewhat sober season and gifts that won't put a dent in their budgets. Those who have ready cash should fare quite well during the downturn, with their fortunes improving the longer the slump continues.
There was some news in the banking sector as Citigroup announced a plan to keep people in their homes, canceling foreclosure plans via mortgage modifications for roughly 500,000 home owners. American Express received approval to become a commercial bank, which will allow it to tap into short-term loans (and maybe a bite or two from the bailout brunch) from the Federal Reserve.
How hard one is affected by economic conditions will vary widely by region and employment. The Northeast seems to be the least affected, as the mortgage meltdown was largely an event outside the region. People in the West, South and Midwest are going to suffer the most, as incomes stagnate, jobs disappear and the fallout from collapsing home prices brings down everything around it.
One thing is becoming more and more clear by the day. The weight of this recession is not going to end with the consumer, but with state and local governments, which are being forced into nearly illiquid circumstances as property tax bases shrink along with all other forms of revenue, especially income and sales taxes. The likelihood of mass layoffs of municipal employees becomes greater with each passing day. Widespread layoffs of public employees could, in fact, turn this recession into a long-lasting depression with unemployment hovering between 12 and 15% of the work force and continued sluggishness throughout the economy.
As the cold winds begin to blow across much of the nation, the feeling is that there's little to stop the surging wave of layoffs, spending cuts and morbid economic circumstances.
Monday, November 10, 2008
Stocks Lose Early Gains; AIG Weighs Down Market
US indices rose more than 2% in the early going, but after peaking within the first hour of trading, stocks slid downhill the remainder of the session, closing near the lows of the day.
Dow 8,870.54 -73.27; NASDAQ 1,616.74 -30.66; S&P 500 919.21 -11.78; NYSE Composite 5,802.05 -69.93
Major concern was raised when it was revealed that the US Treasury, the font from which flows all manner of goodness and capital - out of thin air - agreed to fund failed insurer AIG with another $40 billion, making the total spent on bailing out just that one company more than $150 billion. The money is coming from the omnibus package approved by congress in October which is authorized to spend up to $700 billion to aid ailing financial (and other) firms.
Also topping the news this Monday was word that Circuit City, which just last week announced the closure of more 200 stores, was filing for bankruptcy protection under chapter 11, meaning that it will reorganize while stiffing most of its creditors. Probably better that than putting the US taxpayer on the hook for a slew of unsold DVDs, digital cameras and flat-screen TVs. Maybe the Treasury can give the goods to needy families as Christmas gifts.
China announced their own version of socialized capitalism with a $586 billion bailout plan of their own. If Chinese companies can't make of go of it, who can?
All of that helped destroy what little confidence investors had left, which, not surprisingly, is very little.
Advancing issues trailed decliners by a solid margin, 4357-2002, and new lows remained better than new highs by an expanding margin, 411-12. Volume was on the low side.
NYSE Volume 1,141,823,000
NASDAQ Volume 1,717,664,000
All this should surprise nobody. As mentioned here at the end of last week, the market was poised for a nose-dive after a sharp preelection run-up and now it is merely in the rigorous process of retesting recent lows. The problem for most investors is that those lows were not friendly, nor were they indicative of any kind of bottom. With companies from diverse industries lining up for government money, the extent of this downturn could reach any kind of proportion. Or it could end tomorrow. That is the level of uncertainty faced today.
Commodities seem to have bucked their own downtrend, at least for the time being. Oil priced higher by $1.37, to $62.41. Gold gained $12.30, to $746.50, while silver added 26 cents to close at $10.22.
GM got downgraded and shipper DHL announced more than 9000 job cuts. There was even more bad news, but why belabor the point?
Dow 8,870.54 -73.27; NASDAQ 1,616.74 -30.66; S&P 500 919.21 -11.78; NYSE Composite 5,802.05 -69.93
Major concern was raised when it was revealed that the US Treasury, the font from which flows all manner of goodness and capital - out of thin air - agreed to fund failed insurer AIG with another $40 billion, making the total spent on bailing out just that one company more than $150 billion. The money is coming from the omnibus package approved by congress in October which is authorized to spend up to $700 billion to aid ailing financial (and other) firms.
Also topping the news this Monday was word that Circuit City, which just last week announced the closure of more 200 stores, was filing for bankruptcy protection under chapter 11, meaning that it will reorganize while stiffing most of its creditors. Probably better that than putting the US taxpayer on the hook for a slew of unsold DVDs, digital cameras and flat-screen TVs. Maybe the Treasury can give the goods to needy families as Christmas gifts.
China announced their own version of socialized capitalism with a $586 billion bailout plan of their own. If Chinese companies can't make of go of it, who can?
All of that helped destroy what little confidence investors had left, which, not surprisingly, is very little.
Advancing issues trailed decliners by a solid margin, 4357-2002, and new lows remained better than new highs by an expanding margin, 411-12. Volume was on the low side.
NYSE Volume 1,141,823,000
NASDAQ Volume 1,717,664,000
All this should surprise nobody. As mentioned here at the end of last week, the market was poised for a nose-dive after a sharp preelection run-up and now it is merely in the rigorous process of retesting recent lows. The problem for most investors is that those lows were not friendly, nor were they indicative of any kind of bottom. With companies from diverse industries lining up for government money, the extent of this downturn could reach any kind of proportion. Or it could end tomorrow. That is the level of uncertainty faced today.
Commodities seem to have bucked their own downtrend, at least for the time being. Oil priced higher by $1.37, to $62.41. Gold gained $12.30, to $746.50, while silver added 26 cents to close at $10.22.
GM got downgraded and shipper DHL announced more than 9000 job cuts. There was even more bad news, but why belabor the point?
Friday, November 7, 2008
October Jobs -240,000; Investors Go Bargain-Hunting
The stock market is a discounting mechanism, and that was never more evident over the past three days of trading, which saw anticipation of a report citing massive job losses for October send stocks reeling on the rumors, and then rally today on the actual news.
October Nonfarm Payrolls showed a decline of 240,000 jobs for the month of October, according to Labor Department statistics. The hardest-hit segments were retailing, construction, manufacturing and consumer finance, though almost no segment was spared. Unemployment spiked to 6.5%, the highest in 14 years. Thank you, George W. Bush, and good riddance.
On the news, investors seemed more relieved than worried, and the bottom-fishing sent stocks to a solid finish for the day, though the indices finished roughly 4% lower than where they had started. Following a dismal October, November is starting off not much better.
Dow 8,943.81 +248.02; NASDAQ 1,647.40 +38.70; S&P 500 930.99 +26.11; NYSE Composite 5,871.98 +204.58
Market internals offered a solid reflection of the buoyant trade to end the week. Advancers outnumbered losers, 4166-2122. New lows beat down new highs, once again, 331-10.
Volume on Friday was the lightest of the week.
NYSE Volume 1,226,627,000
NASDAQ Volume 1,915,632,000
Commodities stabilized. Oil was up 27 cents to $61.04. Gold gained $2.00 to $734.20, while silver slipped 9 cents to $9.96. Overall, it was an historic week that ended on a bright note, despite those horrid jobless numbers.
The market will likely continue to plumb the bottom for weeks.
October Nonfarm Payrolls showed a decline of 240,000 jobs for the month of October, according to Labor Department statistics. The hardest-hit segments were retailing, construction, manufacturing and consumer finance, though almost no segment was spared. Unemployment spiked to 6.5%, the highest in 14 years. Thank you, George W. Bush, and good riddance.
On the news, investors seemed more relieved than worried, and the bottom-fishing sent stocks to a solid finish for the day, though the indices finished roughly 4% lower than where they had started. Following a dismal October, November is starting off not much better.
Dow 8,943.81 +248.02; NASDAQ 1,647.40 +38.70; S&P 500 930.99 +26.11; NYSE Composite 5,871.98 +204.58
Market internals offered a solid reflection of the buoyant trade to end the week. Advancers outnumbered losers, 4166-2122. New lows beat down new highs, once again, 331-10.
Volume on Friday was the lightest of the week.
NYSE Volume 1,226,627,000
NASDAQ Volume 1,915,632,000
Commodities stabilized. Oil was up 27 cents to $61.04. Gold gained $2.00 to $734.20, while silver slipped 9 cents to $9.96. Overall, it was an historic week that ended on a bright note, despite those horrid jobless numbers.
The market will likely continue to plumb the bottom for weeks.
Thursday, November 6, 2008
Selling Continues as Investors Await Jobs Report
The post-election selling spree that began on Wednesday continued uninterrupted on Thursday, as investors took short-lived gains across the board in advance of Friday's expected blockbuster Nonfarm Payroll report, due out prior to the market open, at 8:30 am ET.
Retracing the massive gains made in the six sessions leading up to and including election day (Oct. 27 - Nov. 4), the Dow has lopped off nearly 1000 points in just the last two days as it wends it's way inexorably towards a retest of the low at 8175.
Dow 8,695.79 -443.48; NASDAQ 1,608.70 -72.94; S&P 500 904.88 -47.89; NYSE Composite 5,667.40 -344.77
Despite claims by some woefully misinformed political analysts who believe the market's performance is somehow a Wall Street referendum on the election of Barack Obama as the nation's 44th President, more astute analysis insists that investors are quickly taking profits before they are completely wiped away with the fallout from the very scary jobs report which may show US employers shedding as many as 200,000 positions in October.
Adding to the malaise on Thursday were the somewhat expected poor showing by retailers, many of which posted declines in same-store sales from the October period a year ago. That retailers would suffer in the midst of a recession is rather old news and hardly worth a check mark on the short list. The two-day pounding taken by oil prices is much more interesting and actually a bright spot for strapped consumers. More on that below.
Market internals continued to confirm the headline numbers. Advancing issues were overwhelmed again by decliners, 5133-1230. New lows expanded the gap over new highs, 357-13. Not only have new lows exceeded new highs every day except five or six for over a year now, but the number of new highs has shrunk to levels not seen in many years. It is indicative of an economic tsunami that is battering every sector and sparing all but a few stocks. Just about any individual share price is down by at least 20% from a year ago, with many off by 50-70% or more.
Volume was higher today than yesterday, indicating another flushing out of weak-kneed profit-takers.
NYSE Volume 1,525,795,000
NASDAQ Volume 2,510,131,000
As mentioned earlier, oil took another major hit, despite announced cuts by OPEC. Crude for December delivery lost $4.53, hitting $60.77, a 20-month low. Gold declined another $10.20, to $732.20, with some analysts expecting a bottom in the $650 range. It could go lower even than that. Silver fell 40 cents to $10.06, remaining the most skittish of the metals. Since silver has some industrial demand as well as intrinsic value, holders and dealers have not been quite able to grasp a price range for long. The price continues to yo-yo wildly.
Tomorrow's Nonfarms Payroll report from the Labor Department will come on top of today's revelation that the number of Americans drawing unemployment is now the highest in 25 years. Should the Dow spiral down below the 8175 mark, investors should brace for more selling in weeks and months ahead.
Despite the inordinately positive news of Obama's presidency, there are still 2 1/2 months until he officially takes the reins of power. While David Letterman and others wish he could get started sooner, the world - or what's left of it - must wait until January 20, 2009. It is upon that date and in the 30-60 days immediately following, that will determine our economic fates for years to come.
Plans are no doubt already afoot for another stimulus package aimed this time at taxpayers instead of bankers, but it will take much more than government hand-outs to repair what's broken in America's financial markets. The high of 14,250 on the Dow was just a year ago, but it seems so much further away than that now.
Retracing the massive gains made in the six sessions leading up to and including election day (Oct. 27 - Nov. 4), the Dow has lopped off nearly 1000 points in just the last two days as it wends it's way inexorably towards a retest of the low at 8175.
Dow 8,695.79 -443.48; NASDAQ 1,608.70 -72.94; S&P 500 904.88 -47.89; NYSE Composite 5,667.40 -344.77
Despite claims by some woefully misinformed political analysts who believe the market's performance is somehow a Wall Street referendum on the election of Barack Obama as the nation's 44th President, more astute analysis insists that investors are quickly taking profits before they are completely wiped away with the fallout from the very scary jobs report which may show US employers shedding as many as 200,000 positions in October.
Adding to the malaise on Thursday were the somewhat expected poor showing by retailers, many of which posted declines in same-store sales from the October period a year ago. That retailers would suffer in the midst of a recession is rather old news and hardly worth a check mark on the short list. The two-day pounding taken by oil prices is much more interesting and actually a bright spot for strapped consumers. More on that below.
Market internals continued to confirm the headline numbers. Advancing issues were overwhelmed again by decliners, 5133-1230. New lows expanded the gap over new highs, 357-13. Not only have new lows exceeded new highs every day except five or six for over a year now, but the number of new highs has shrunk to levels not seen in many years. It is indicative of an economic tsunami that is battering every sector and sparing all but a few stocks. Just about any individual share price is down by at least 20% from a year ago, with many off by 50-70% or more.
Volume was higher today than yesterday, indicating another flushing out of weak-kneed profit-takers.
NYSE Volume 1,525,795,000
NASDAQ Volume 2,510,131,000
As mentioned earlier, oil took another major hit, despite announced cuts by OPEC. Crude for December delivery lost $4.53, hitting $60.77, a 20-month low. Gold declined another $10.20, to $732.20, with some analysts expecting a bottom in the $650 range. It could go lower even than that. Silver fell 40 cents to $10.06, remaining the most skittish of the metals. Since silver has some industrial demand as well as intrinsic value, holders and dealers have not been quite able to grasp a price range for long. The price continues to yo-yo wildly.
Tomorrow's Nonfarms Payroll report from the Labor Department will come on top of today's revelation that the number of Americans drawing unemployment is now the highest in 25 years. Should the Dow spiral down below the 8175 mark, investors should brace for more selling in weeks and months ahead.
Despite the inordinately positive news of Obama's presidency, there are still 2 1/2 months until he officially takes the reins of power. While David Letterman and others wish he could get started sooner, the world - or what's left of it - must wait until January 20, 2009. It is upon that date and in the 30-60 days immediately following, that will determine our economic fates for years to come.
Plans are no doubt already afoot for another stimulus package aimed this time at taxpayers instead of bankers, but it will take much more than government hand-outs to repair what's broken in America's financial markets. The high of 14,250 on the Dow was just a year ago, but it seems so much further away than that now.
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