Angry mobs tend to occur most in times of high stress and their anger, more often than not is directed at two groups: the government and the rich.
Over the past few days we have witnessed an angry Iraqi journalist throw shoes at our outgoing president, Mr. Bush, and a photographer emerge from a mob to shove billionaire criminal Bernard Madoff, the man who stole billions of dollars from some of the most sophisticated investors in the world.
In less civilized times, more people would have joined in the effort. Imagine if other journalists had joined Muntadar al-Zeidi in his "shoe protest" or that ordinary citizens and scorned investors had been part of the media throng outside Madoff's tony Manhattan apartment. Bush may have been injured, or worse. Madoff might have been beaten to death on the street.
It may come to that.
The world economy is teetering on the brink of disaster and up to this point all of the remedies have been directed by the government toward the rich. These are the two groups most responsible for the economic calamities which have befallen us. Nary a nickel has been offered to homeowners, average working class Joes and Janes who are struggling to make ends meet in difficult times. If matters continue to spin out of control, would anyone be surprised to hear that a wall Street banker is gunned down in broad daylight or that workers' protests turn violent? does anyone not believe that rank-and-file union members at GM would not want to punch CEO Rick Waggoner squarely on the kisser, or poke a finger in the eye of his counterpart at Chrysler, Bob Nardelli?
That's why these people fly on private jets, ride in bullet-proof limousines and dine at the most exclusive restaurants. Not because they're rich and they can - that's surely part of it - but they must fear for their personal safety. A high-up executive dining at a worker-type diner would be taking his own physical well-being very much for granted at times like this, and chances are very good that conditions will worsen in coming days, weeks and months. Those execs, and especially the walled-in Wall Street types had better hope they don't become victims of their greed.
Angry people have a tendency to find company and turn into angry mobs, capable of all kinds of violence and disruptive behavior. Here in America, and surely, in places around the globe, we have seen it all before. Deteriorating economic conditions for large swathes of people can ignite mob passions into burning infernos. While that is the outcome we would least desire, the actions of the Iraqi journalist and the NY photographer may be the proverbial tip of the iceberg.
There's plenty of video of both events available, though the one Madoff video most circulated (aired o CNBC) doesn't really capture the scene well. I found these clips from ABC news to be of the highest quality, but since they are owned by ABC, I cannot embed them here. Here are links to the Bush incident and Bernie Madoff outside his apartment building. (Both links should open in new windows)
As for the state of the economy, investors are still not convinced of anything, especially since Chrysler announced plans to shut down all 30 of their US plants for a month, beginning Friday.
If there's anything that can cause the stock market to swoon, it's uncertainty, and in the final 33 days before George Bush leaves the White House and Barack Obama moves in, uncertainty is a commodity that will be in ample supply. There are only a handful of trading days left in the year, and of course, following that, this January may be one of the worst we've seen in a while, though last year's was certainly no picnic.
For today, investors got scared off early in the day. The major indices were marginally higher in early trading, but by 10 o'clock they were all flat lining. By noon they all began to sink and by the close of the session, the losses had extended, resulting in another bad day on the Street.
Dow 8,604.99, -219.35 (2.49%)
NASDAQ 1,552.37, -26.94 (1.71%)
S&P 500 885.28, -19.14 (2.12%)
NYSE Composite 5,617.76, -152.04 (2.64%
This should come as no surprise. stocks are essentially overbought, short term, and lows will once again be retested, since a new low was put in just a month ago, on November 20. We are due for another round of profit-taking, selling and options-related mischief. Friday, by the way, is a quadruple witching day, and the last of the year. It could turn into a whopper of a session.
For Thursday, the internals were as bloody as the headlines, with declining issues outpacing advancers, 4045-2670. New lows surpassed new highs by a margin of 163-34. Volume was moderate to low, especially on the NYSE.
NYSE Volume 1,382,620,000
NASDAQ Volume 2,064,510,000
In commodities trading, oil futures continued to drop precipitously, falling another 10%, or $3.84, to $36.22, the lowest price for a barrel of light crude in 4 1/2 years. Gold fell into line, dropping, $7.90, to $860.60, with silver following the trend, losing 30 cents to close at $11.12.
It was another day for deflation, and surely not the last. At least the executives of Exxon Mobil and Chevron will feel a little more secure in their mansions. Their counterparts in banking and finance may have reason to cower and hide in darkness.
Thursday, December 18, 2008
Wednesday, December 17, 2008
Abundant Disappointment
US equity markets failed to follow-through on Tuesday's massive Fed-induced rally. There is still ample concern that the global economy is undergoing a fundamental de-leveraging and deflationary shift.
Judging by the tenor of the trading, there was profit-taking right at the open, followed by sucker buying through middle of the day, briefly pushing the major indices into positive territory, and a pronounced selling bias at the close, with the Dow Industrials losing more than 80 points in the final 10 minutes.
Dow 8,824.34, -99.80 (1.12%)
NASDAQ 1,579.31, -10.58 (0.67%)
S&P 500 904.42, -8.76 (0.96%)
NYSE Composite 5,769.80, -35.17 (0.61%)
Also figuring into the equation was the price of crude oil. On the heels of the largest production cut ever announced by OPEC - 2.2 million barrels daily - prices sank below $40 per barrel in trading on the NY Mercantile Exchange, and closed at a four-year low of $40.06.
The rationale for the spirited selling of oil futures is the perception that - repeat after me - the global economy is in or heading into a prolonged period of deflation. Demand for fossil fuels is expected to actually fall by as much as 4% globally next year. That people and organizations would curtail their consumption in light of the ridiculous prices for petroleum and its derivatives should come as no surprise. The hidden factors are the promulgation of alternative, renewable sources of energy and conservation measures which went full-bore as the price for oil spiked to unsustainable levels. The drain from the pricing structure of the past four to five years on economies worldwide has never been accurately calculated, though it is certainly sizable. Overshadowed by the systemic collapse of the banking system (it has already collapsed and been resurrected by central banks, though nobody wants to admit that) oil's impact on wealth and disposable income has not been adequately understood nor explained by either the financial or mainstream media.
Nonetheless, investors continue to view stocks as very risky, and with good reason. A recent survey found that 74% of all questioned said that they planned to spend less this year on Christmas presents than last. Percentages varied, but if three quarters of the population is going to be engaged in Scrooge-like penny pinching, then the retailers, at the top of the food chain, are toast. In the middle, the manufacturers will see profits slide and at the bottom, raw materials providers and service industries will be negatively affected to various degrees.
It's going to be a nice Christmas for most consumers. Business owners and executives may have a different set of results.
Interestingly enough, market internals told a different story which bears notice. Advancing issues finished comfortably ahead of decliners, 3762-2943. Could this have been a stealth rally? Perhaps. Selective selling would be a more appropriate term. New lows were muted, registering only 166 - a multi-week low - to 48 new highs. This is the kind of trend bulls have sought. Increases in new highs are the function of a variety of factors, main among them, speculation and momentum. This could very well signal an extension of the rally, though 9000 on the Dow should prove to be tough to crack. With as much excess capacity as exists today, and given the new-found disposition for saving, betting on a long term rally is about as safe as shooting craps in Las Vegas. The internals are probably reflecting nothing more than some recovery of stocks which were sunk during the downturn in late 2007.
Volume was average.
NYSE Volume 1,340,071,000
NASDAQ Volume 2,150,876,000
Commodities carried on as they have over the past couple of weeks, with oil closing lower, down $3.54, to $40.06. Precious metals continued their relentless march higher. Again, this is unsurprising due to the Fed's Zero interest rate policy, which, at its core, is inflationary (and, I should add, rather pointless and ill-advised). Gold gained $25.80, closing at $868.50. Silver was up 72 cents, to $11.42. Both of these were massive upticks and may indicate a near-term blow-off top. Then again, the gold bugs of the world say their metal should be worth $2000 and $35, respectively. The reality is that they are only another asset class and have no viable place in modern economies. Unless the global economy collapses, of course. Then, people will be cutting off each other's hands for their jewelry. That is an unlikely scenario in most civilized nations, though I'm certain that anecdotal evidence will emerge to demonstrate the civility of all, and soon.
One might surmise from reading some of my daily rants, that I should carry around a sign stating that "The End is Near." That's actually close, as I believe the end is already here.
It's the holiday season. Peace. Joy.
Judging by the tenor of the trading, there was profit-taking right at the open, followed by sucker buying through middle of the day, briefly pushing the major indices into positive territory, and a pronounced selling bias at the close, with the Dow Industrials losing more than 80 points in the final 10 minutes.
Dow 8,824.34, -99.80 (1.12%)
NASDAQ 1,579.31, -10.58 (0.67%)
S&P 500 904.42, -8.76 (0.96%)
NYSE Composite 5,769.80, -35.17 (0.61%)
Also figuring into the equation was the price of crude oil. On the heels of the largest production cut ever announced by OPEC - 2.2 million barrels daily - prices sank below $40 per barrel in trading on the NY Mercantile Exchange, and closed at a four-year low of $40.06.
The rationale for the spirited selling of oil futures is the perception that - repeat after me - the global economy is in or heading into a prolonged period of deflation. Demand for fossil fuels is expected to actually fall by as much as 4% globally next year. That people and organizations would curtail their consumption in light of the ridiculous prices for petroleum and its derivatives should come as no surprise. The hidden factors are the promulgation of alternative, renewable sources of energy and conservation measures which went full-bore as the price for oil spiked to unsustainable levels. The drain from the pricing structure of the past four to five years on economies worldwide has never been accurately calculated, though it is certainly sizable. Overshadowed by the systemic collapse of the banking system (it has already collapsed and been resurrected by central banks, though nobody wants to admit that) oil's impact on wealth and disposable income has not been adequately understood nor explained by either the financial or mainstream media.
Nonetheless, investors continue to view stocks as very risky, and with good reason. A recent survey found that 74% of all questioned said that they planned to spend less this year on Christmas presents than last. Percentages varied, but if three quarters of the population is going to be engaged in Scrooge-like penny pinching, then the retailers, at the top of the food chain, are toast. In the middle, the manufacturers will see profits slide and at the bottom, raw materials providers and service industries will be negatively affected to various degrees.
It's going to be a nice Christmas for most consumers. Business owners and executives may have a different set of results.
Interestingly enough, market internals told a different story which bears notice. Advancing issues finished comfortably ahead of decliners, 3762-2943. Could this have been a stealth rally? Perhaps. Selective selling would be a more appropriate term. New lows were muted, registering only 166 - a multi-week low - to 48 new highs. This is the kind of trend bulls have sought. Increases in new highs are the function of a variety of factors, main among them, speculation and momentum. This could very well signal an extension of the rally, though 9000 on the Dow should prove to be tough to crack. With as much excess capacity as exists today, and given the new-found disposition for saving, betting on a long term rally is about as safe as shooting craps in Las Vegas. The internals are probably reflecting nothing more than some recovery of stocks which were sunk during the downturn in late 2007.
Volume was average.
NYSE Volume 1,340,071,000
NASDAQ Volume 2,150,876,000
Commodities carried on as they have over the past couple of weeks, with oil closing lower, down $3.54, to $40.06. Precious metals continued their relentless march higher. Again, this is unsurprising due to the Fed's Zero interest rate policy, which, at its core, is inflationary (and, I should add, rather pointless and ill-advised). Gold gained $25.80, closing at $868.50. Silver was up 72 cents, to $11.42. Both of these were massive upticks and may indicate a near-term blow-off top. Then again, the gold bugs of the world say their metal should be worth $2000 and $35, respectively. The reality is that they are only another asset class and have no viable place in modern economies. Unless the global economy collapses, of course. Then, people will be cutting off each other's hands for their jewelry. That is an unlikely scenario in most civilized nations, though I'm certain that anecdotal evidence will emerge to demonstrate the civility of all, and soon.
One might surmise from reading some of my daily rants, that I should carry around a sign stating that "The End is Near." That's actually close, as I believe the end is already here.
It's the holiday season. Peace. Joy.
Tuesday, December 16, 2008
The Fed Makes Money Free
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.
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.
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.
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