The roller coaster ride continues with volatility now being hailed as "permanent" by some pundits in the "new" investing environment. Whenever I hear the word "new" and any kind of financial advantage tied to it, my initial instinct is to to liquidate all positions, break out the survivalist gear and head for the hills, because it's almost certain that the market is about to blow down again.
Remember the "new economy" tech bubble of the late 1990s? all of those whiz-bang internet start-ups ended dreadfully circa 2000. Most of them went completely belly up, some survived as mere shadows of their former market capitalizations when it was determined that having a .com at the end of your company name did not automatically imply a valid business plan.
So, please refrain with any "new" ideas. The newness of subprime, interest-only loans, ARMs, packaged SIVs and derivatives have bequeathed today's investors with toxicity throughout all markets, lack of direction and general malaise in almost all earth-bound economies. There's nothing new about this current stock market condition except that the only reliable model is that of the era from 1929-1934, otherwise known as the depths of the Great Depression.
Not that I am one to throw cold water on humping dogs just to ruin their pleasure, but the frequent comparisons are becoming more and more commonplace, and the stock charts stunningly similar. In case you think I'm joking, take a look at two charts of the Dow Jones Industrial Average (each of these links will open in a new window). The first is from August 1, 1929 - December 10, 1929. Then, look at this one from August 1, 2008 - December 10, 2008.
Eerie, huh?
What may be more frightening is the future. If one extends that 1929 chart out to January 1934, when the market finally began to recover, one would see that the bottom was somewhere around 50 (actually 41), from the September top of 380. If you wish to make the comparison, using the August near-top
I continue to make my case that we are now in the early days of the 2nd Great Depression. I know many readers are turned off by this, having been fed the pablum of the masses via mass media on TV and over the airwaves, but I am only reporting what I see happening and comparing it to a previous economic epoch upon which few are well-educated.
Over the coming months, I'll give you not only the bread line stories, but methodology by which you can survive and, hopefully, prosper during what will be very trying times for many. One place to begin looking for success is within the medium which you are now viewing. The internet is one of the greatest business tools ever devised. Many small, medium and large businesses are not only holding their own during this pressing period, but improving, innovating and growing. It was the same during the original Great Depression. While many established businesses were failing, some others were innovating and becoming prosperous. It took a good deal of guile, intuition, blind faith and luck, but there are success stories already emerging. Another area is the "green" environmental movement, which is taking cast-offs and turning them into useful products, recycling waste into energy and producing innovations in everything from building materials to energy.
Dow 8,565.09, -196.33 (2.24%)
NASDAQ 1,507.88, -57.60 (3.68%)
S&P 500 873.59, -25.65 (2.85%)
NYSE Composite 5,504.73, -126.34 (2.24%)
As for today's market of overpriced stocks with convoluted accounting regimes, most of them were losers. Decliners beat back advancing issues, 4947-1730. New lows surpassed new highs by 206-16. Volume remained static.
NYSE Volume 1,469,365,000
NASDAQ Volume 2,078,145,375
While stocks were taking another one on the chin, commodities were offering proof that speculation is not yet dead. Oil advanced by $4.46, closing at $47.98. Gold finished at $826.60, up another $17.80, building off multi-session gains. Silver also gained, adding 23 cents, to $10.43.
Thursday, December 11, 2008
Wednesday, December 10, 2008
Getting a Grip on Deflation
It's been widely reported that while Fed chairmen, such as Ben Bernanke and his predecessor, Alan Greenspan, dread inflation, what really keeps them up at night is the opposite, deflation. There's probably more than just a kernel of truth to that nugget, and while it can be safely assumed that Greenspan, pushing 90, generally gets plenty of rest, Bernanke is probably having more sleepless nights than he would have ever imagined.
The irony for "Helicopter Ben," who got the nickname when he once opined - when a lowly Fed governor and not head of the whole shooting match - that the US has the ultimate hedge against deflation, a printing press, and that the Fed could "drop money from helicopters" if that was needed to stem a serious slowdown in the economy. Ironic, indeed, because Bernanke has used all the tools at his disposal, and then some, to halt what began as a "contained" subprime mortgage brush fire in 2007, and morphed into a worldwide credit conflagration in 2008 - and none of it has worked.
Today's rise on the US stock markets was nothing more than noise in the middle of a vicious bear market environment. Nothing goes straight up or down, but the Dow seems stuck permanently below the 9000 mark and the other indices haven't gotten much traction either.
Dow 8,761.42, +70.09 (0.81%)
NASDAQ 1,565.48, +18.14 (1.17%)
S&P 500 899.24, +10.57 (1.19%)
NYSE Composite 5,631.07, +108.61 (1.97%)
Ben Bernanke has presided as the Fed Chairman over the worst decline in stocks and the most gargantuan evaporation of wealth EVER. Note, that's not "since the Great Depression," but of all time. An estimated $13 trillion dollars has vanished from the brokerage accounts of citizens, bank balance sheets and real estate values in just the last 16 months, much of it disappearing in just the last three.
The Fed has slashed interest rates, opened its lending facility to more than just member banks, helped Treasury give away a couple hundred billion more to banks on the brink and continues to watch over a global economy that every day sinks lower and lower down the deflation ladder. Home prices, stocks, bond yields, commodities and everything else is being repriced lower on nearly a daily basis. That today and other days are more encouraging that the days of steep losses is insignificant noise in the grander scheme. All asset classes are being treated the same: as worth less than yesterday.
Deflation's specter need not alarm everyone. In fact, as stated in previous posts, for many, deflation is a kind of blessing, giving consumers massive discounts on everything from fish to bread to DVDs. Those who worry about the effect of deflation are anyone with large sums of money, especially if those sums are invested in stocks, art, bonds, real estate or businesses. Of course, some items, like rent, for instance, or taxes, are not falling as quickly as others, if at all, but that day will come. It has to, as a part of the economic cycle, along with decreases in wages (or, more the more commonly-used substitute today: layoffs) and other basic costs, expenses and wealth measurements.
So, the real point is that as long as you have income of some kind, sufficient to meet your needs, you should be fine. If your income is shut off, you will more than likely be unable to replace it in whole (in other words, if you lose your job, your next one is likely to pay less). Those are the real sufferers. Not the banks, bankers, brokers, dealers, etc. The pain is being shared by the unemployed or underemployed and businesses who have lost access to that spending power.
In a truly democratic society, which the USA, is, of course, not, economic cycles would be eliminated by shared pleasure and pain. All wages would go up or down by the same percentage, as would taxes and prices. Naturally, in a capitalist world, that is impossible. while there is pain for some, there still is gain for others, though the two are unequal and unbalanced.
On the day, more stocks gained than lost, 4537-2149. The number of new highs to new lows remained almost static with 191 new lows to just 13 new highs. Volume trended lower than what it has been recently. Whatever rallying mood there was in the AM, dissipated badly in the afternoon, with the Dow briefly sinking into negative territory after 2:00 pm.
NYSE Volume 1,305,271,000
NASDAQ Volume 1,987,494,000
Oil gained $1.45 to close at $43.52. Gold was up $34.60, to $808.80. Silver was higher by 35 cents, to $10.20 per ounce. All of these commodity traders, especially those in precious metals markets are still insisting that theirs is the only "true" currency, that gold should soar to $2000 any day now. They are sorely mistaken. Gold is a great hedge against inflation. Against deflation, it is just another asset waiting to be devalued.
One item of note was today's Monthly Wholesale Trade Report. [PDF], which showed wholesale inventories and sales diverging at an alarming pace, year over year. while sales were lower on a month-to-month basis (-1.1%), they were actually higher than a year ago (+2.7%). Inventories were down 1.1% from September to October, but up 8% from a year ago. The ratio of inventory to sales is rising rapidly, and considering that the data is already more than a month old, is likely to be rising even today. Growing inventory during a sales slump is not a problem most businesses wish to encounter, but it is the prevailing environment today. Obviously, product is moving at a slower pace off wholesalers' shelves, another sign of the times. Consumer spending is grinding to a halt. After the holidays, it will get worse.
OK, that's today's lesson on How to Survive the Second Great Depression. Have a steak for dinner tonight. Beef is cheap.
The irony for "Helicopter Ben," who got the nickname when he once opined - when a lowly Fed governor and not head of the whole shooting match - that the US has the ultimate hedge against deflation, a printing press, and that the Fed could "drop money from helicopters" if that was needed to stem a serious slowdown in the economy. Ironic, indeed, because Bernanke has used all the tools at his disposal, and then some, to halt what began as a "contained" subprime mortgage brush fire in 2007, and morphed into a worldwide credit conflagration in 2008 - and none of it has worked.
Today's rise on the US stock markets was nothing more than noise in the middle of a vicious bear market environment. Nothing goes straight up or down, but the Dow seems stuck permanently below the 9000 mark and the other indices haven't gotten much traction either.
Dow 8,761.42, +70.09 (0.81%)
NASDAQ 1,565.48, +18.14 (1.17%)
S&P 500 899.24, +10.57 (1.19%)
NYSE Composite 5,631.07, +108.61 (1.97%)
Ben Bernanke has presided as the Fed Chairman over the worst decline in stocks and the most gargantuan evaporation of wealth EVER. Note, that's not "since the Great Depression," but of all time. An estimated $13 trillion dollars has vanished from the brokerage accounts of citizens, bank balance sheets and real estate values in just the last 16 months, much of it disappearing in just the last three.
The Fed has slashed interest rates, opened its lending facility to more than just member banks, helped Treasury give away a couple hundred billion more to banks on the brink and continues to watch over a global economy that every day sinks lower and lower down the deflation ladder. Home prices, stocks, bond yields, commodities and everything else is being repriced lower on nearly a daily basis. That today and other days are more encouraging that the days of steep losses is insignificant noise in the grander scheme. All asset classes are being treated the same: as worth less than yesterday.
Deflation's specter need not alarm everyone. In fact, as stated in previous posts, for many, deflation is a kind of blessing, giving consumers massive discounts on everything from fish to bread to DVDs. Those who worry about the effect of deflation are anyone with large sums of money, especially if those sums are invested in stocks, art, bonds, real estate or businesses. Of course, some items, like rent, for instance, or taxes, are not falling as quickly as others, if at all, but that day will come. It has to, as a part of the economic cycle, along with decreases in wages (or, more the more commonly-used substitute today: layoffs) and other basic costs, expenses and wealth measurements.
So, the real point is that as long as you have income of some kind, sufficient to meet your needs, you should be fine. If your income is shut off, you will more than likely be unable to replace it in whole (in other words, if you lose your job, your next one is likely to pay less). Those are the real sufferers. Not the banks, bankers, brokers, dealers, etc. The pain is being shared by the unemployed or underemployed and businesses who have lost access to that spending power.
In a truly democratic society, which the USA, is, of course, not, economic cycles would be eliminated by shared pleasure and pain. All wages would go up or down by the same percentage, as would taxes and prices. Naturally, in a capitalist world, that is impossible. while there is pain for some, there still is gain for others, though the two are unequal and unbalanced.
On the day, more stocks gained than lost, 4537-2149. The number of new highs to new lows remained almost static with 191 new lows to just 13 new highs. Volume trended lower than what it has been recently. Whatever rallying mood there was in the AM, dissipated badly in the afternoon, with the Dow briefly sinking into negative territory after 2:00 pm.
NYSE Volume 1,305,271,000
NASDAQ Volume 1,987,494,000
Oil gained $1.45 to close at $43.52. Gold was up $34.60, to $808.80. Silver was higher by 35 cents, to $10.20 per ounce. All of these commodity traders, especially those in precious metals markets are still insisting that theirs is the only "true" currency, that gold should soar to $2000 any day now. They are sorely mistaken. Gold is a great hedge against inflation. Against deflation, it is just another asset waiting to be devalued.
One item of note was today's Monthly Wholesale Trade Report. [PDF], which showed wholesale inventories and sales diverging at an alarming pace, year over year. while sales were lower on a month-to-month basis (-1.1%), they were actually higher than a year ago (+2.7%). Inventories were down 1.1% from September to October, but up 8% from a year ago. The ratio of inventory to sales is rising rapidly, and considering that the data is already more than a month old, is likely to be rising even today. Growing inventory during a sales slump is not a problem most businesses wish to encounter, but it is the prevailing environment today. Obviously, product is moving at a slower pace off wholesalers' shelves, another sign of the times. Consumer spending is grinding to a halt. After the holidays, it will get worse.
OK, that's today's lesson on How to Survive the Second Great Depression. Have a steak for dinner tonight. Beef is cheap.
Tuesday, December 9, 2008
Blue Chips Seeing Red
Stocks spent all day Tuesday trading underwater and ended near the lows of the day. It seems the sense of the rally from the past few days has been lost on most people with eyes, ears and brains still functioning. Any number of major firms announced more layoffs and/or 2009 forecasts that were well below previous expectations, ranging from poor to dismal, including such notables as Sony Corp., Texas Instrument, Dow Chemical, Nucor, Altera, Broadcom, Disney and FedEx.
The realities of unemployment at 8 or 9% by February, with real unemployment (including the underemployed - part time workers - and those who have simply given up looking and are not counted in government churned and massaged figures) at 14-16%, have begun to sink in, even on Wall Street.
The idea that stocks could go anywhere but down or sideways over the coming six to nine months is beginning to look like a pure pipe dream. Stocks, already battered and beaten down, are sure to fall even further, perhaps as much as 30% or more from current levels. I do not enjoy making these kinds of predictions, but somebody must speak the truth.
Bankruptcy protection is being sought by entities as diverse as the Tribune Co. and the Baltimore Symphony. The list of companies already having announced layoffs is so massive that it took CNBC three full pages to cover them all. But that's hardly the end of it. CNBC also reports that even more job losses than predicted are possible. They're looking at 400-500,000 again in December.
Once again, one has to question where this is all heading. It's pretty simple if you are unafraid to face reality. We are entering a global depression, the likes of which the world has not known since the dreadful 1930s. The culprits are the same - overleveraged bankers without supervision from government led to massive failures (see Citigroup, AIG, Lehman Bros. Bear Stearns, Countrywide, Merrill Lynch, et. al.), government assistance arrived too late and in too arcane a form, credit markets either collapsed or were so severely reigned in by the creditors that almost nobody could borrow for anything, leaving ordinary citizens without work, without credit, and mostly without money to pay for even basic necessities. It's time for the churches to re-open the soup kitchens en masse.
If 16% of the employment force is realistically not working, not earning and thus, not spending, consider the effect that has on all businesses, at every level. There is going to be a shortfall in either gross sales or profits, but more than likely, both. That will only lead to more layoffs, less sales, slimmer profits and a reinforcement of the deflation cycle. Prices will become cheaper for everything, though few will have the money to afford anything.
All of this will take some time, but in the meanwhile, class warfare will break out between haves and have-nots. The haves will be mostly those in the employ of various government entities - towns, cities, states and the feds. The have-nots will generally be everyone else. Somewhere in between these will be a new class of entrepreneurs, hardened like steel to the new environment, who will eventually take the lead in retooling the old establishment and redefining business for the 21st century. Many of these people will be unseen, toiling on the internet or otherwise in relative obscurity, but they shall be the long-term winners. Business models of the past, along with any needless government intervention and regulation, will be tossed aside, ignored or worked around. Give them a broken economy, a computer, keyboard, a mouse, and about four to six years and these new business leaders will reshape everything from journalism to banking to energy. Many of them have already begun.
That there will be a silver lining in the form of new structure of economics, business and leadership won't matter much to the millions who will lose jobs, homes, self-respect and sadly, for some, lives. America and the world is about to embark on a terrible journey to hell and back. Some will not survive the trip.
It was only yesterday that I was informed - much to my surprise - that some very well-heeled-looking people had actually considered filing for bankruptcy over the weekend, and they still may. This is the plight of the typical American suburban family with kids, no savings and loads of debt who are being squeezed by banks that are cutting lines of credit, mostly the home equity variety. The bankers are more than happy to loan cash or credit for goods at 15-25%, but those 6% lines are quickly becoming a thing of the past.
More than any one group, it is the banking institutions - those we've been attempting to "bail out" and "keep from collapsing" - that have caused and continue to exacerbate the conditions extant in the US and broader economies. There's nothing new about this. Brain-dead bankers have always been at the forefront of the worst of any condition: wars, famine, pestilence, foreclosure, bankruptcy, you name it, the bankers will be there with unbending rules and outstretched hands. They are the scourge of every society, from the Pharaohs of Egypt to modern times.
So, is the general investment community and Wall Street finally "getting it?" Not quite yet. There are still advertisements and commercials touting investing in stocks. There will be fewer of them in coming months as the value of stocks sinks further. I've seen ads so convoluted as to suggest that the best time to make money with stocks is during bear markets. Since stocks go down during bear markets, nothing could actually be further from the truth. Others are calling bottoms, touting "sectors" and pimping the stock du jour to the increasingly-desperate and clueless crowd that hasn't already thrown in the equities towel.
But, as each day passes, there is more evidence that hope is fading faster, that even the mighty will fall, and fall harder than most. When 11 of the 30 Dow stocks are trading at $25 per share or less, none of them higher than $85 and all of them down for the year, the seriousness of our current economic condition can hardly be overstated.
Dow 8,691.33, -242.85 (2.72%)
NASDAQ 1,547.34, -24.40 (1.55%)
S&P 500 888.67, -21.03 (2.31%)
NYSE Composite 5,522.66, -117.02 (2.07%)
For the day, only 3 of 30 Dow Industrials finished with gains - Citigroup, DuPont and Intel. In the broader market, the selling intensified as the day wore on, with declining issues outdistancing advancers by a margin of 4452-2264. The number of new lows increased again, to 182, versus a paltry 20 new highs. Volume was a little stronger than normal. All indications are pointing to a retest of the October 27 and November 20 lows. Chances of falling below the year's bottom (Dow 7527) are high, and general concerns are mounting again.
NYSE Volume 1,434,055,000
NASDAQ Volume 2,277,691,000
Oil fell another $1.55, to $42.16. Gold gained $6.40, to $775.70, while silver dropped 16 cents to $9.82. Commodities continue to tell today's story and that of the future. As commodities slump, so will prices of all goods. In addition to drops in the main trio followed here daily, prices for everything from natural gas to pork bellies have taken hits over the past few months.
The remainder of the week offers little in the way of economic data until Friday, when the PPI figures are released along with November retail sales, which have already been demonstrably weak according to data supplied by the retailers themselves and various tracking firms. If no news is good news, it would likely be preferable to ignore what is sure to be a dismal day of data to finish the week.
Only 16 days until Christmas!
The realities of unemployment at 8 or 9% by February, with real unemployment (including the underemployed - part time workers - and those who have simply given up looking and are not counted in government churned and massaged figures) at 14-16%, have begun to sink in, even on Wall Street.
The idea that stocks could go anywhere but down or sideways over the coming six to nine months is beginning to look like a pure pipe dream. Stocks, already battered and beaten down, are sure to fall even further, perhaps as much as 30% or more from current levels. I do not enjoy making these kinds of predictions, but somebody must speak the truth.
Bankruptcy protection is being sought by entities as diverse as the Tribune Co. and the Baltimore Symphony. The list of companies already having announced layoffs is so massive that it took CNBC three full pages to cover them all. But that's hardly the end of it. CNBC also reports that even more job losses than predicted are possible. They're looking at 400-500,000 again in December.
Once again, one has to question where this is all heading. It's pretty simple if you are unafraid to face reality. We are entering a global depression, the likes of which the world has not known since the dreadful 1930s. The culprits are the same - overleveraged bankers without supervision from government led to massive failures (see Citigroup, AIG, Lehman Bros. Bear Stearns, Countrywide, Merrill Lynch, et. al.), government assistance arrived too late and in too arcane a form, credit markets either collapsed or were so severely reigned in by the creditors that almost nobody could borrow for anything, leaving ordinary citizens without work, without credit, and mostly without money to pay for even basic necessities. It's time for the churches to re-open the soup kitchens en masse.
If 16% of the employment force is realistically not working, not earning and thus, not spending, consider the effect that has on all businesses, at every level. There is going to be a shortfall in either gross sales or profits, but more than likely, both. That will only lead to more layoffs, less sales, slimmer profits and a reinforcement of the deflation cycle. Prices will become cheaper for everything, though few will have the money to afford anything.
All of this will take some time, but in the meanwhile, class warfare will break out between haves and have-nots. The haves will be mostly those in the employ of various government entities - towns, cities, states and the feds. The have-nots will generally be everyone else. Somewhere in between these will be a new class of entrepreneurs, hardened like steel to the new environment, who will eventually take the lead in retooling the old establishment and redefining business for the 21st century. Many of these people will be unseen, toiling on the internet or otherwise in relative obscurity, but they shall be the long-term winners. Business models of the past, along with any needless government intervention and regulation, will be tossed aside, ignored or worked around. Give them a broken economy, a computer, keyboard, a mouse, and about four to six years and these new business leaders will reshape everything from journalism to banking to energy. Many of them have already begun.
That there will be a silver lining in the form of new structure of economics, business and leadership won't matter much to the millions who will lose jobs, homes, self-respect and sadly, for some, lives. America and the world is about to embark on a terrible journey to hell and back. Some will not survive the trip.
It was only yesterday that I was informed - much to my surprise - that some very well-heeled-looking people had actually considered filing for bankruptcy over the weekend, and they still may. This is the plight of the typical American suburban family with kids, no savings and loads of debt who are being squeezed by banks that are cutting lines of credit, mostly the home equity variety. The bankers are more than happy to loan cash or credit for goods at 15-25%, but those 6% lines are quickly becoming a thing of the past.
More than any one group, it is the banking institutions - those we've been attempting to "bail out" and "keep from collapsing" - that have caused and continue to exacerbate the conditions extant in the US and broader economies. There's nothing new about this. Brain-dead bankers have always been at the forefront of the worst of any condition: wars, famine, pestilence, foreclosure, bankruptcy, you name it, the bankers will be there with unbending rules and outstretched hands. They are the scourge of every society, from the Pharaohs of Egypt to modern times.
So, is the general investment community and Wall Street finally "getting it?" Not quite yet. There are still advertisements and commercials touting investing in stocks. There will be fewer of them in coming months as the value of stocks sinks further. I've seen ads so convoluted as to suggest that the best time to make money with stocks is during bear markets. Since stocks go down during bear markets, nothing could actually be further from the truth. Others are calling bottoms, touting "sectors" and pimping the stock du jour to the increasingly-desperate and clueless crowd that hasn't already thrown in the equities towel.
But, as each day passes, there is more evidence that hope is fading faster, that even the mighty will fall, and fall harder than most. When 11 of the 30 Dow stocks are trading at $25 per share or less, none of them higher than $85 and all of them down for the year, the seriousness of our current economic condition can hardly be overstated.
Dow 8,691.33, -242.85 (2.72%)
NASDAQ 1,547.34, -24.40 (1.55%)
S&P 500 888.67, -21.03 (2.31%)
NYSE Composite 5,522.66, -117.02 (2.07%)
For the day, only 3 of 30 Dow Industrials finished with gains - Citigroup, DuPont and Intel. In the broader market, the selling intensified as the day wore on, with declining issues outdistancing advancers by a margin of 4452-2264. The number of new lows increased again, to 182, versus a paltry 20 new highs. Volume was a little stronger than normal. All indications are pointing to a retest of the October 27 and November 20 lows. Chances of falling below the year's bottom (Dow 7527) are high, and general concerns are mounting again.
NYSE Volume 1,434,055,000
NASDAQ Volume 2,277,691,000
Oil fell another $1.55, to $42.16. Gold gained $6.40, to $775.70, while silver dropped 16 cents to $9.82. Commodities continue to tell today's story and that of the future. As commodities slump, so will prices of all goods. In addition to drops in the main trio followed here daily, prices for everything from natural gas to pork bellies have taken hits over the past few months.
The remainder of the week offers little in the way of economic data until Friday, when the PPI figures are released along with November retail sales, which have already been demonstrably weak according to data supplied by the retailers themselves and various tracking firms. If no news is good news, it would likely be preferable to ignore what is sure to be a dismal day of data to finish the week.
Only 16 days until Christmas!
Monday, December 8, 2008
More Bank for the Buck Monday
Investors followed up Friday's dazzling rally - on the heels of one of the worst monthly jobs reports ever - with another day of inexplicable gains for beaten-down stocks. all of the major indices recorded gains of at least 3% on the day, boosting the averages back above levels prior to last Monday's near-fatal crash.
Dow 8,934.18, +298.76 (3.46%)
NASDAQ 1,571.74, +62.43 (4.14%)
S&P 500 909.70, +33.63 (3.84%)
NYSE Composite 5,639.68, +238.43 (4.41%
That puts the onus clearly on the most speculative players on the street, as stocks have, as of today, reached levels oddly reminiscent of mid-October, when the economy and the stock market (a leading indicator) were in the throes of one of the worst down-trends of all time.
Clearly, there is something missing in the equation. Investors were dumping stocks for months, culminating in a pair of deep dives to unprecedented levels on October 27 (Dow 8175) and then November 20 (Dow 7552). Since then, nothing has really changed. As a matter of conjecture, conditions have likely worsened, bringing into play the possibility of massive short-covering on both Friday of last week and today.
The non-farm labor report released on December 5, which portrayed the US economy as teetering on the brink with a net loss of over 1/2 million jobs serves as a backdrop to whatever trading has followed. While slashing jobs are generally viewed as good for the balance sheet, the sheer size of November's losses (to say nothing of the revised figures from September and October) must give one pause to consider the general health of the overall economy.
Even the argument that US companies are insulated against US job losses because of their now-global stature fails to hold water. The rest of the world's labor force is being similarly downsized, crimping demand for all manner of products. Retail sales, auto sales and commodity prices are all lower. stocks continue to recover, however. The depth of the denial in the minds of investors and Wall St analysts is stunning.
On the day, advancing issues held sway over decliners, 5153-1637. Today's gap-up did manage to quell the swelling in the number of new lows, which shrank to just 164. There were, however, only 29 new highs. Volume was at normal levels. All this indicates is that investors are still day-trading. No real trend exists except the persistent signs of a solidly bearish market.
NYSE Volume 7,334,573,000
Nasdaq Volume 2,340,814,750
Commodities were mostly priced higher. Oil rebounded $3.11, to $43.92. Gold climbed $22.00, closing at $774.20 in New York, while silver jumped 59 cents, to $10.02.
There was little in the way of genuine news. Congress is still mulling plans to either loan or give money to the Big Three automakers - Ford, GM and Chrysler - though there has been some grumbling about Chrysler, since they have been in private hands for over two years now, owned by Cerberus Capital Partners, a private equity buyout firm. UAW has made comments seeking a board seat and other management concessions in exchange for wage cuts. The price of the Big 3 Bailout is somewhere between $15 billion and $34 billion, though the estimates continue to point toward the lower end of that range.
Media conglomerate, Tribune Co., sought Chapter 11 bankruptcy protection, though, in a pique of irony, kept the Chicago Cubs and Wrigley Field out of the protective umbrella. The Cubs have not won a World Series since 1908. Tribune owns some highly-regarded media properties, including the Chicago Tribune, the LA Times, the Baltimore Sun and Chicago superstation WGN.
They are the first major newspaper chain to seek bankruptcy protection, but surely won't be the last. It just goes to show the value system in America today: bankers get bailouts; writers get rocks.
Dow 8,934.18, +298.76 (3.46%)
NASDAQ 1,571.74, +62.43 (4.14%)
S&P 500 909.70, +33.63 (3.84%)
NYSE Composite 5,639.68, +238.43 (4.41%
That puts the onus clearly on the most speculative players on the street, as stocks have, as of today, reached levels oddly reminiscent of mid-October, when the economy and the stock market (a leading indicator) were in the throes of one of the worst down-trends of all time.
Clearly, there is something missing in the equation. Investors were dumping stocks for months, culminating in a pair of deep dives to unprecedented levels on October 27 (Dow 8175) and then November 20 (Dow 7552). Since then, nothing has really changed. As a matter of conjecture, conditions have likely worsened, bringing into play the possibility of massive short-covering on both Friday of last week and today.
The non-farm labor report released on December 5, which portrayed the US economy as teetering on the brink with a net loss of over 1/2 million jobs serves as a backdrop to whatever trading has followed. While slashing jobs are generally viewed as good for the balance sheet, the sheer size of November's losses (to say nothing of the revised figures from September and October) must give one pause to consider the general health of the overall economy.
Even the argument that US companies are insulated against US job losses because of their now-global stature fails to hold water. The rest of the world's labor force is being similarly downsized, crimping demand for all manner of products. Retail sales, auto sales and commodity prices are all lower. stocks continue to recover, however. The depth of the denial in the minds of investors and Wall St analysts is stunning.
On the day, advancing issues held sway over decliners, 5153-1637. Today's gap-up did manage to quell the swelling in the number of new lows, which shrank to just 164. There were, however, only 29 new highs. Volume was at normal levels. All this indicates is that investors are still day-trading. No real trend exists except the persistent signs of a solidly bearish market.
NYSE Volume 7,334,573,000
Nasdaq Volume 2,340,814,750
Commodities were mostly priced higher. Oil rebounded $3.11, to $43.92. Gold climbed $22.00, closing at $774.20 in New York, while silver jumped 59 cents, to $10.02.
There was little in the way of genuine news. Congress is still mulling plans to either loan or give money to the Big Three automakers - Ford, GM and Chrysler - though there has been some grumbling about Chrysler, since they have been in private hands for over two years now, owned by Cerberus Capital Partners, a private equity buyout firm. UAW has made comments seeking a board seat and other management concessions in exchange for wage cuts. The price of the Big 3 Bailout is somewhere between $15 billion and $34 billion, though the estimates continue to point toward the lower end of that range.
Media conglomerate, Tribune Co., sought Chapter 11 bankruptcy protection, though, in a pique of irony, kept the Chicago Cubs and Wrigley Field out of the protective umbrella. The Cubs have not won a World Series since 1908. Tribune owns some highly-regarded media properties, including the Chicago Tribune, the LA Times, the Baltimore Sun and Chicago superstation WGN.
They are the first major newspaper chain to seek bankruptcy protection, but surely won't be the last. It just goes to show the value system in America today: bankers get bailouts; writers get rocks.
Friday, December 5, 2008
1/2 M Jobs Lost in Month. Stocks Rally? Really?
US employers slashed 533,000 jobs in November, according to the most recent Nonfarm Payrolls report, released this morning by the Dept. Of Labor.
While that figure alone may be mind-boggling, being that it was the largest one-month job loss since 1974 (when we went off the gold standard), the number crunchers at Labor provided more proof of just how sloppy and contrived government figures have been.
It's becoming increasingly clear that Bush administration operatives were hell-bent on keeping a lid on the depth of economic destruction leading up to the election. Not only have we learned - on Monday - that the US has been in a recession since December of 2007 (despite "official" GDP figures for the 1st and 2nd quarters of 2008 showing growth), but now we have revisions of 199,000 more jobs lost in the two months just prior to the election.
It's a good thing these people are on the way out. Maybe we can restore some faith in government with a new administration that gives us the straight story, and that's a big maybe.
Dow 8,635.42, +259.18 (3.09%)
NASDAQ 1,509.31, +63.75 (4.41%)
S&P 500 876.07, +30.85 (3.65%)
NYSE Composite 5,401.25, +168.99 (3.23%)
As expected, stocks started out the day on the downside and spent most of the session in the red, until about 2:30 pm. At that point, following a 250-point rally that brought the Dow Jones Industrials to break-even, stocks went straight up. It seems the good, old, tried-and-true pumping tactics of the PPT have not gone the way of the buggy whip and the typewriter.
With stocks taking the worst jobs news in decades so much in stride that they would rally, one has to believe that today's action is about as temporary as a prostitute's decency. Stocks, by almost any measure, have much further to fall. The rosy pictures painted by economists fail to understand the dynamics of the global economic tsunami which has swept in via the corrupt banking and capital-creation system.
Figure the Dow at 5,000, the S&P at 500 and the NASDAQ around 1000 before this is all over.
If those figures sound too harsh, take a gander at any long-range linear charts of the indices in question to discover just how overvalued stocks had become since 1982. Then try to understand the concept of "mean reversion" in which the indices will revert to old habits and ranges. We've been involved in the largest economic fiction ever devised, which began in the 70s when we went off the gold standard, and increased in complexity through Reaganomics, was exploited through the Clinton years and finally exposed and degraded during the Bush II administration.
Of course, nobody believed me when I predicted - last year - that the Dow would plummet below 10,000. Heck, i hardly believed it when it actually happened. Now, I understand just how correct I was and have gotten over the shock and scare of a global depression and can clearly predict where the economy is headed.
We're in for a world of hurt. If the last few months seemed harsh to you, prepare to grab your ankles for another rough ride. This is going to get MUCH, MUCH WORSE than anyone believes or is prepared to state publicly.
If today's trading is any indication, the stock market, along with the government, has gone completely off the rails. More likely, each of them have been far from solvent or honest for at least 18 months. Now would be a good time to start declaring 10 dependents on your W-2, hoarding cash, canned goods and firewood (along with firearms). The rioting will begin sometime next year, if not sooner. Hungry people without jobs or homes can do two things well: riot and die. My thinking is that there will be plenty of both in coming months.
In case you haven't noticed throughout this turbulent fall, all bailout legislation has focused on big business, mostly banking, and not a penny for the average American. Worse yet, the taxpayer has not only not received a plugged nickel, he and she are responsible for the debt. That's part of the social contract we made when we elected the people who are now giving away our money. Naturally, most Americans have been opposed to bailing out businesses from the start, and still are today. The aforementioned social fabric has been pretty badly torn of late, so a new word should enter into everyone's lexicon: repudiate.
It's a wonderful word which releases you from all responsibility to the word or words immediately following it. Repeat after me: I repudiate all debt incurred by the federal government since the illegal election of George W. Bush in November 2000.
Wham! There goes about a $30,000 obligation. Now, if we could get another 200 million or so Americans to do the same thing, we could reduce our debt to pre-2000 level, when the government was actually turning a profit and our national debt was something on the order of $3.8 trillion, not the $12 trillion it's about to become. You want to see stocks soar? Try that little trick!
On the day, advancing issues pummeled decliners, 4496-2151, but the truth lie in the number of new lows (489) to new highs (29). New highs have been flat for some time, though new lows showed gains all week. Trajectory is still negative. Volume was normal.
NYSE Volume 1,552,209,000
NASDAQ Volume 2,224,416,000
That stocks went up so much on Friday is odd, since everything else seemed to be falling in price. Oil fell another $1.92, to an unbelievably reasonable $41.75. Get out and buy an SUV for Christmas! Gold was down $6.50, at $759.00. Silver gained a penny to $9.53
Despite Friday's gains, all indices ended lower for the week, which is as it should be, though we are not nearly down as much as would normally be expected. That 7500 level was no bottom.
It wasn't a really bad week for some, though for people without jobs, it isn't getting any easier. New businesses need to be formed to replace the ones failing now. The biggest and best - companies like Coca Cola (KO), Proctor & Gamble, Exxon-Mobile, Wal-Mart and McDonald's will survive and even prosper. There are actually some good value plays with dividends emerging from that group. But for the rest of the smaller, leveraged businesses and individuals, life is going to sour.
What say we abolish or severely cut the payroll (income) tax? Nothing would put people back to work and boost real estate values any more effectively. Let the federal government run a deficit on that basis.
But Friday's rally seemed to be right out of one of Kafka's most visceral dreams.
While that figure alone may be mind-boggling, being that it was the largest one-month job loss since 1974 (when we went off the gold standard), the number crunchers at Labor provided more proof of just how sloppy and contrived government figures have been.
Employers cut 403,000 jobs in September, versus 284,000 previously estimated. Another 320,000 were chopped in October, compared with an initial estimate of 240,000.
It's becoming increasingly clear that Bush administration operatives were hell-bent on keeping a lid on the depth of economic destruction leading up to the election. Not only have we learned - on Monday - that the US has been in a recession since December of 2007 (despite "official" GDP figures for the 1st and 2nd quarters of 2008 showing growth), but now we have revisions of 199,000 more jobs lost in the two months just prior to the election.
It's a good thing these people are on the way out. Maybe we can restore some faith in government with a new administration that gives us the straight story, and that's a big maybe.
Dow 8,635.42, +259.18 (3.09%)
NASDAQ 1,509.31, +63.75 (4.41%)
S&P 500 876.07, +30.85 (3.65%)
NYSE Composite 5,401.25, +168.99 (3.23%)
As expected, stocks started out the day on the downside and spent most of the session in the red, until about 2:30 pm. At that point, following a 250-point rally that brought the Dow Jones Industrials to break-even, stocks went straight up. It seems the good, old, tried-and-true pumping tactics of the PPT have not gone the way of the buggy whip and the typewriter.
With stocks taking the worst jobs news in decades so much in stride that they would rally, one has to believe that today's action is about as temporary as a prostitute's decency. Stocks, by almost any measure, have much further to fall. The rosy pictures painted by economists fail to understand the dynamics of the global economic tsunami which has swept in via the corrupt banking and capital-creation system.
Figure the Dow at 5,000, the S&P at 500 and the NASDAQ around 1000 before this is all over.
If those figures sound too harsh, take a gander at any long-range linear charts of the indices in question to discover just how overvalued stocks had become since 1982. Then try to understand the concept of "mean reversion" in which the indices will revert to old habits and ranges. We've been involved in the largest economic fiction ever devised, which began in the 70s when we went off the gold standard, and increased in complexity through Reaganomics, was exploited through the Clinton years and finally exposed and degraded during the Bush II administration.
Of course, nobody believed me when I predicted - last year - that the Dow would plummet below 10,000. Heck, i hardly believed it when it actually happened. Now, I understand just how correct I was and have gotten over the shock and scare of a global depression and can clearly predict where the economy is headed.
We're in for a world of hurt. If the last few months seemed harsh to you, prepare to grab your ankles for another rough ride. This is going to get MUCH, MUCH WORSE than anyone believes or is prepared to state publicly.
If today's trading is any indication, the stock market, along with the government, has gone completely off the rails. More likely, each of them have been far from solvent or honest for at least 18 months. Now would be a good time to start declaring 10 dependents on your W-2, hoarding cash, canned goods and firewood (along with firearms). The rioting will begin sometime next year, if not sooner. Hungry people without jobs or homes can do two things well: riot and die. My thinking is that there will be plenty of both in coming months.
In case you haven't noticed throughout this turbulent fall, all bailout legislation has focused on big business, mostly banking, and not a penny for the average American. Worse yet, the taxpayer has not only not received a plugged nickel, he and she are responsible for the debt. That's part of the social contract we made when we elected the people who are now giving away our money. Naturally, most Americans have been opposed to bailing out businesses from the start, and still are today. The aforementioned social fabric has been pretty badly torn of late, so a new word should enter into everyone's lexicon: repudiate.
It's a wonderful word which releases you from all responsibility to the word or words immediately following it. Repeat after me: I repudiate all debt incurred by the federal government since the illegal election of George W. Bush in November 2000.
Wham! There goes about a $30,000 obligation. Now, if we could get another 200 million or so Americans to do the same thing, we could reduce our debt to pre-2000 level, when the government was actually turning a profit and our national debt was something on the order of $3.8 trillion, not the $12 trillion it's about to become. You want to see stocks soar? Try that little trick!
On the day, advancing issues pummeled decliners, 4496-2151, but the truth lie in the number of new lows (489) to new highs (29). New highs have been flat for some time, though new lows showed gains all week. Trajectory is still negative. Volume was normal.
NYSE Volume 1,552,209,000
NASDAQ Volume 2,224,416,000
That stocks went up so much on Friday is odd, since everything else seemed to be falling in price. Oil fell another $1.92, to an unbelievably reasonable $41.75. Get out and buy an SUV for Christmas! Gold was down $6.50, at $759.00. Silver gained a penny to $9.53
Despite Friday's gains, all indices ended lower for the week, which is as it should be, though we are not nearly down as much as would normally be expected. That 7500 level was no bottom.
It wasn't a really bad week for some, though for people without jobs, it isn't getting any easier. New businesses need to be formed to replace the ones failing now. The biggest and best - companies like Coca Cola (KO), Proctor & Gamble, Exxon-Mobile, Wal-Mart and McDonald's will survive and even prosper. There are actually some good value plays with dividends emerging from that group. But for the rest of the smaller, leveraged businesses and individuals, life is going to sour.
What say we abolish or severely cut the payroll (income) tax? Nothing would put people back to work and boost real estate values any more effectively. Let the federal government run a deficit on that basis.
But Friday's rally seemed to be right out of one of Kafka's most visceral dreams.
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