Lowering interest rates to 1% - as Alan Greenspan did earlier in the decade - seems to be not enough for current Fed Chairman "Helicopter" Ben Bernanke. Today's cut in the Federal Funds rate, from 1% to "0 to 1/4 percent" is an all-time low for the Fed, and sadly, for the United States. The absurdity of making more credit and money available when that is the reason for the problem defies all logic, yet that is the approach Chairman Bernanke and the Governors of the FOMC have chosen all along.
Additionally, the Fed cut the discount rate to 1/2%, making it easier for banks to borrow from the Fed.
Now, with all this extra dough floating around, shouldn't we all be living on Easy Street? One would assume as much, but there's a little problem which goes something like, "you get what you pay for." The banks, since they are not paying much for the opportunity to bolster their balance sheets, see absolutely no reason to lend out the money at anything approaching reasonable rates. Instead, banks are hoarding cash and have raised lending standards to abnormally high levels, so that unless you have near-perfect credit history, you can't borrow a single dime.
There are many mainstream views on the Fed's move which purport that the lowering of the rate is merely "window dressing" or that it is only "symbolic." As far as anyone can tell, the symbolism is that America is for sale to the lowest bidder, Americans need not apply. Accordingly, the dollar fell precipitously against the Euro and Yen while US equity markets soared on the news. Naturally, financial firms led the massive rally, which pushed the S&P 500 to a 5-week high.
Dow 8,924.14, +359.61 (4.20%)
NASDAQ 1,589.89, +81.55 (5.41%)
S&P 500 913.18, +44.61 (5.14%)
NYSE Compos 5,804.97, +307.07 (5.59%)
Internals confirmed that the rally was broad and deep, with advancers overwhelming decliners, 5552-1264. New lows, however, expanded to 223, to just 31 new highs. The rally was fueled in part by the inflating Fed, short covering and outright speculation with money borrowed at almost nothing. It goes to reason that the free-spenders on Wall Street would have a field day with all the free money they've been dealt over the past three months, regardless the actual state of the US and global economies. All this does is run the Fed out of one set of bullets (rate cuts) and set up a massive market meltdown by late Winter or Spring of 2009. Volume was, as one would expect, on the high side.
NYSE Volume 1,539,748,000
NASDAQ Volume 2,217,972,000
Despite the massive Fed cut and fall in the dollar, oil continued to slide, losing 91 cents to close at $43.60. The metals continued their rally, with gold gaining $6.20, to $842.70 and silver ahead 9 cents to $10.71.
Perhaps the most significant anecdotal evidence that the entire world economy is now running on fairy-tale, make-believe money was the activity in shares of Goldman Sachs (GS). The company posted its first loss since going public in 1999, a massive $4.97 per share, but gained 14% on the day (76.00, +9.54). But why not. Goldman recently was converted from an investment bank to a bank-holding company and received $10 billion from the US Treasury in November as part of the TARP welfare for banks program. We should all be doing so well, or, so poorly.
It's the last bullet for the Fed's rate policy unless they begin to believe that paying people to take money off their hands is a good idea. It may come to that, as the Fed expands its balance sheet by leaps and bounds, at the same time sinking the dollar and the world economy. It's a new world order, all right. The banks will eventually own everything, which, in turn will be owned by the central banks. Capitalism is over, democracy you can pretty much kiss goodbye. That will be gone in coming years when the federal government begins to dictate every aspect of our lives, and we're almost there now.
Tuesday, December 16, 2008
Monday, December 15, 2008
The Dance - and the Fraud - Continues
Wall Street continues to dance to whatever tune is set before them. On certain days, they change partners, some doing tangos replete with dizzying dips and turns, while others waltz casually or two-step through the day. Yes, there are day-traders and buy-and-holders, investors and charlatans, but today they all took a turn at the tango, precisely at 3:30 pm, with just one half hour left to dance.
At that point, with the major indices all at or near their lows of the day, it was time to tango, and, as the band played a warped version of Bolerostocks rose dramatically, with the Dow rising almost 150 points in about 7 1/2 minutes. A lovely dance it was, and such an abjectly fraudulent one. Whatever the purpose, to salve the wounds of the already harmed, or keep the masses outside the markets from rioting, the players, and dancers were the same. The Fed, Goldman Sachs, the PPT, banks playing with TARP money, day-traders and outright louts and thieves were all in there making - or losing - a buck or two or a billion or more.
Any gains under the current market conditions are likely to be fake, as phony as the money backing them, or backing away from them. We have no economy any more, no market system, no trading regime. What we have is the remains of a corrupted, defunct, defeated grand Ponzi scheme, one at which Bernie Madoff would stand in awe. we are witnessing the end of the Wall Street capitalist money machine, but the dancers don't want to stop dancing just yet. No, it's all happening too fast for them, too suddenly. Why, the little people are demanding that CEOs not receive bonuses and that their pay be cut. The nerve!
It's what we've got, folks, like it or not. As individual investors already know all too well, the little guy has no chance against the megalithic monstrosities created by the wizards of Wall Street. Their bets are hedged, while the little guy goes naked, believing in the "system." But the system is broken and the evidence of it grows daily. Today's little dance was just a warm-up to the Zulu death spiral this spring. They'll be dancing and spinning right into the fire pits then.
Dow 8,564.53, -65.15 (0.75%)
NASDAQ 1,508.34, -32.38 (2.10%)
S&P 500 868.57, -11.16 (1.27%)
NYSE Composite 5,497.90, -46.06 (0.83%)
On the day, the internals were far worse than the headline numbers might suggest. Decliners absolutely overwhelmed advancing issues, by a score of 4857-1821. New lows bested new highs, 222-15. Volume could best be characterized as pathetic, more like a mid-summer session than a Christmas and tax-selling one.
NYSE Volume 1,214,382,000
NASDAQ Volume 1,671,975,000
Meanwhile, some of our favorite commodities diverged. Oil fell $1.77, to $44.51, though gold gained $16.00, to $836.50, and silver pushed ahead 32 cents, to $10.62. This is not surprising, though not everyone is still sold on the argument for precious metals, though it is a compelling one. In a deflationary environment, such as we are in, oil could fall as low as $20 per barrel. The metals have weathered the storm better than almost all other investments, and will retain value no matter what. Gold seems especially overpriced today, though purists will tell you it's cheap, even at these levels.
Nobody really knows, though. But, if all other measures of wealth go by the wayside, gold will return to prominence and that seems like a bet worth taking, or hedging.
Note that industrial production fell 0.6% in November, as did Capacity Utilization, which dropped to 75.4% from 76.0% in October. Slowly we turn...
At that point, with the major indices all at or near their lows of the day, it was time to tango, and, as the band played a warped version of Bolerostocks rose dramatically, with the Dow rising almost 150 points in about 7 1/2 minutes. A lovely dance it was, and such an abjectly fraudulent one. Whatever the purpose, to salve the wounds of the already harmed, or keep the masses outside the markets from rioting, the players, and dancers were the same. The Fed, Goldman Sachs, the PPT, banks playing with TARP money, day-traders and outright louts and thieves were all in there making - or losing - a buck or two or a billion or more.
Any gains under the current market conditions are likely to be fake, as phony as the money backing them, or backing away from them. We have no economy any more, no market system, no trading regime. What we have is the remains of a corrupted, defunct, defeated grand Ponzi scheme, one at which Bernie Madoff would stand in awe. we are witnessing the end of the Wall Street capitalist money machine, but the dancers don't want to stop dancing just yet. No, it's all happening too fast for them, too suddenly. Why, the little people are demanding that CEOs not receive bonuses and that their pay be cut. The nerve!
It's what we've got, folks, like it or not. As individual investors already know all too well, the little guy has no chance against the megalithic monstrosities created by the wizards of Wall Street. Their bets are hedged, while the little guy goes naked, believing in the "system." But the system is broken and the evidence of it grows daily. Today's little dance was just a warm-up to the Zulu death spiral this spring. They'll be dancing and spinning right into the fire pits then.
Dow 8,564.53, -65.15 (0.75%)
NASDAQ 1,508.34, -32.38 (2.10%)
S&P 500 868.57, -11.16 (1.27%)
NYSE Composite 5,497.90, -46.06 (0.83%)
On the day, the internals were far worse than the headline numbers might suggest. Decliners absolutely overwhelmed advancing issues, by a score of 4857-1821. New lows bested new highs, 222-15. Volume could best be characterized as pathetic, more like a mid-summer session than a Christmas and tax-selling one.
NYSE Volume 1,214,382,000
NASDAQ Volume 1,671,975,000
Meanwhile, some of our favorite commodities diverged. Oil fell $1.77, to $44.51, though gold gained $16.00, to $836.50, and silver pushed ahead 32 cents, to $10.62. This is not surprising, though not everyone is still sold on the argument for precious metals, though it is a compelling one. In a deflationary environment, such as we are in, oil could fall as low as $20 per barrel. The metals have weathered the storm better than almost all other investments, and will retain value no matter what. Gold seems especially overpriced today, though purists will tell you it's cheap, even at these levels.
Nobody really knows, though. But, if all other measures of wealth go by the wayside, gold will return to prominence and that seems like a bet worth taking, or hedging.
Note that industrial production fell 0.6% in November, as did Capacity Utilization, which dropped to 75.4% from 76.0% in October. Slowly we turn...
Friday, December 12, 2008
Senate Sends Detroit Pink Slips
It has been amazing to watch the unwinding of the economy the past few months, but some of the most riveting action occurred this week on Capitol Hill, where congress debated a bailout plan for Detroit's Big 3 automakers: Ford, Chrysler and General Motors.
Forget the fact that there are at least 15 other automobile manufacturers that are producing vehicles in the US, the executives of these oh-so-American icons of the well-traveled road have been bending the collective ears of congress for the better part of a month now, having argued against the "catastrophic" consequences of their imminent failure by seeking first, a bailout, second, a bridge loan, and finally, "anything" for two of the three (Chrysler and GM), ad Ford fessed up to being in better shape than they had previously let on.
At the end of Thursday night, they still had nothing to show for their weeks of jaw-boning. Senate Republicans (God bless each and every one of their conservative hearts) balked at the idea that the UAW unions would not accept wage concessions to seal a deal, though behind the scenes, it was suggested that the senators wanted the removal of key management figures - especially GM's Rick Waggoner - before signing off on any deal, and that was not part of the package.
In any case, the Senate vote was so far short of a majority last night that the deal fell apart. Now the Bush White House is pondering helping the automakers out on their own, using $15 billion from the TARP plan, originally designed to help ailing banks, but recently having empowered Treasury Secretary to spend the money as he sees fit. Oddly enough, there is just $15 billion left in the first $250 billion tranche approved by congress, exactly the amount GM and Chrysler need.
If the money is made available to Chrysler, it will be a first, in that Chrysler was purchased wholly by Cerberus Equity Partners, a private firm, a few years ago. If the government gets into the business of bailing out privately-held firms, then the doors to hell have been flung wide open. Every small business in need of a lift should head to the Capitol to get his or her share of the booty.
It's a fascinating chapter in the nation's financial history, albeit a very weird one and one which could lead to unforeseen, unintended consequences down the road.
In response, global markets tanked on word that congress was not going to help the automakers, and Wall Street began the morning with a steep loss, until rumor of the administration acting without congressional approval or action began to percolate through the brokerages. stocks gathered momentum throughout the day, with all indices ending with marginal gains.
Dow 8,629.68, +64.59 (0.75%)
NASDAQ 1,540.72, +32.84 (2.18%)
S&P 500 879.73, +6.14 (0.70%)
NYSE Composite 5,543.96, +39.23 (0.71%)
The indicators inside the broader market were mixed. While advancing issues defeated decliners for the day, 4219-2420, However, the steep morning sell-off produced a discouraging result as new lows expanded to 267, while only 11 issues registered new highs. This is indeed a departure from the trend, signaling further losses ahead. Volume was the lightest of the week.
NYSE Volume 5,981,236,500
NASDAQ Volume 1,866,510,500
Adding to the morning's scare was the PPI release for November, which showed the producer price index falling by 2.2% on the heels of October's 2.8% drop. It was just more news the markets didn't need, further proof that the economy remains in a recession/deflation downward spiral.
This piece of video also caught my attention. If you think the worst is behind us, wait until February when malls will turn into ghost towns. It's not getting any better. In fact, economic conditions are almost certain to worsen over the next few months.
Commodities reversed course from the previous few sessions. Oil lost $1.70, to $46.28. Gold dipped $6.10, to $820.50, and silver fell 20 cents to $10.23. Food and fuel prices continue to decline in both wholesale and retail markets. Good for consumers, but not so bright for producers and farmers.
We continue to seek a bottom but don't see one any time soon. Have a nice weekend.
Forget the fact that there are at least 15 other automobile manufacturers that are producing vehicles in the US, the executives of these oh-so-American icons of the well-traveled road have been bending the collective ears of congress for the better part of a month now, having argued against the "catastrophic" consequences of their imminent failure by seeking first, a bailout, second, a bridge loan, and finally, "anything" for two of the three (Chrysler and GM), ad Ford fessed up to being in better shape than they had previously let on.
At the end of Thursday night, they still had nothing to show for their weeks of jaw-boning. Senate Republicans (God bless each and every one of their conservative hearts) balked at the idea that the UAW unions would not accept wage concessions to seal a deal, though behind the scenes, it was suggested that the senators wanted the removal of key management figures - especially GM's Rick Waggoner - before signing off on any deal, and that was not part of the package.
In any case, the Senate vote was so far short of a majority last night that the deal fell apart. Now the Bush White House is pondering helping the automakers out on their own, using $15 billion from the TARP plan, originally designed to help ailing banks, but recently having empowered Treasury Secretary to spend the money as he sees fit. Oddly enough, there is just $15 billion left in the first $250 billion tranche approved by congress, exactly the amount GM and Chrysler need.
If the money is made available to Chrysler, it will be a first, in that Chrysler was purchased wholly by Cerberus Equity Partners, a private firm, a few years ago. If the government gets into the business of bailing out privately-held firms, then the doors to hell have been flung wide open. Every small business in need of a lift should head to the Capitol to get his or her share of the booty.
It's a fascinating chapter in the nation's financial history, albeit a very weird one and one which could lead to unforeseen, unintended consequences down the road.
In response, global markets tanked on word that congress was not going to help the automakers, and Wall Street began the morning with a steep loss, until rumor of the administration acting without congressional approval or action began to percolate through the brokerages. stocks gathered momentum throughout the day, with all indices ending with marginal gains.
Dow 8,629.68, +64.59 (0.75%)
NASDAQ 1,540.72, +32.84 (2.18%)
S&P 500 879.73, +6.14 (0.70%)
NYSE Composite 5,543.96, +39.23 (0.71%)
The indicators inside the broader market were mixed. While advancing issues defeated decliners for the day, 4219-2420, However, the steep morning sell-off produced a discouraging result as new lows expanded to 267, while only 11 issues registered new highs. This is indeed a departure from the trend, signaling further losses ahead. Volume was the lightest of the week.
NYSE Volume 5,981,236,500
NASDAQ Volume 1,866,510,500
Adding to the morning's scare was the PPI release for November, which showed the producer price index falling by 2.2% on the heels of October's 2.8% drop. It was just more news the markets didn't need, further proof that the economy remains in a recession/deflation downward spiral.
This piece of video also caught my attention. If you think the worst is behind us, wait until February when malls will turn into ghost towns. It's not getting any better. In fact, economic conditions are almost certain to worsen over the next few months.
Commodities reversed course from the previous few sessions. Oil lost $1.70, to $46.28. Gold dipped $6.10, to $820.50, and silver fell 20 cents to $10.23. Food and fuel prices continue to decline in both wholesale and retail markets. Good for consumers, but not so bright for producers and farmers.
We continue to seek a bottom but don't see one any time soon. Have a nice weekend.
Thursday, December 11, 2008
Stocks Down, Commodities Up, Innovation To Be Found
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.
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.
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.
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