Just as last week ended badly for US equity investors, Monday ushered in another round of depressing results.
Another week, another lost dollar. It's just the way it goes when you kill the golden goose, as the financial institutions, regulators and slimy government interlopers killed the Wall Street money machine.
That Wall Street is dead is almost an unmistakable fact. That people haven't noticed should be perhaps of more concern.
The banks - especially Citigroup, JP Morgan Chase, Goldman Sachs and Morgan Stanley (the last two recently having changed their status overnight from investment banks to bank holding companies) - are essentially insolvent. They leveraged their assets so far beyond the pale that US taxpayers have had to pony up cash to salvage what's left of them. Their reserves are maybe 1/50th of their lending, and their balance sheets, when the slime from level 2 and level 3 investments are included, are severely underwater.
Most people in the US and around the world do not understand the massive fraud that is being played out right in front of their eyes. Most of the banks which received TARP funds in the first round (about $350 billion) never lent a penny of the money, but rather used it to bolster their severely-damaged books. Obviously, it wasn't enough, as just today outgoing President Bush sent over a request for the remainder of the money (another $350 billion) to congress. As usual, congress will comply, adding some caveats in hopes that the banks will actually tell somebody, anybody, what they're doing with all that dough.
Don't hold your breath.
Dow 8,473.97, -125.21 (1.46%)
NASDAQ 1,538.79, -32.80 (2.09%)
S&P 500 870.26, -20.09 (2.26%)
NYSE Composite 5,551.03, -151.34 (2.65%
All major indices suffered losses, extending into the 4th straight down day, and the 5th out of 7 in 2009. Decliners led advancers by about 3-1, 5001-1383. New lows were ahead of new highs again, as usual, ad nauseum, 104-15. That gap is expanding, an ominous sign. Volume was pathetic, another signal that all is not well. Not only are investors sitting on the sidelines, many are just plain GONE, vanished, kaput. The level of declines since October have thinned the herd. At least those who have strayed may find greener pastures in foreign, or smaller, local markets. If they're smart, they'll invest in their own local economies instead of playing fat cat with the big boys.
NYSE Volume 1,305,193,000
NASDAQ Volume 1,785,911,000
The lower volume profile thus needs to be understood as a permanent fixture in the new, scorched earth market.
After markets closed, Alcoa (AA) kicked off earnings season by announcing a loss of $1.49 per share for the 4th quarter of 2008. The aluminum giant shed $1.19 billion during the quarter. With this first earnings call in hand, investors are bracing for one of the worst reporting periods on record.
While stocks were winding their way back down - all major indices are down for the year - commodities weren't exactly picking up the slack. Oil plummeted $3.24, to $37.59. Gold slumped $34.00, to $821.00. Silver dipped 57 cents, to $10.75. the ounce. Could be time to begin stocking up on silver bars.
Monday, January 12, 2009
Friday, January 9, 2009
It Always Ends Badly
The trouble with suffering through deep recessions is that there's seldom any respite from the continuing flow of bad news, nor is there relief from the severity of the crushing blows delivered daily to the economy and to investors.
This first full week of January provided a little bit of a glimpse of what the rest of the year is going to look like, and it isn't pretty. After going straight up on Friday of last week, the markets went straight down through the week, ending with a loud thud on Friday that sent all the major indices into negative territory for the year. Lest we not forget, the January Barometer - which has proven to be 91% accurate - says, in a nutshell, as goes January, so goes the year. 2009 is not shaping up to be very good at all.
I've actually been quite amused by the number of supposedly "smart" people who are still encouraging people to hold onto their 401k funds, keep them in stocks, "because they always rebound" and other such nonsense. Stocks are sure to bounce off their lows, but they're probably not even close to their absolute bottoms yet. The number of bankruptcies by listed companies in 2009 is going to astound even these "experts," especially the ones who said recovery will begin in the second half of the year.
Anyone currently accumulating either cash, gold, silver or all of the above will be rewarded handsomely at the end of this corrective period, whenever that is... 2010, 2011 or later.
What sank the indices on Friday was no surprise announcement. The Bureau of Labor Statistics, that august group of number massagers, pronounced on Friday morning that the US had shed another 524,000 jobs in December, and that's almost surely off by at least 100,000. The number ADP applied to December job losses on Wednesday was 693,000, and that's more believable, though the stock pushers will gladly take the "official" government number as gospel (or at least that's what they'll tell their clients), being that it's 1/3 smaller than reality.
Dow 8,599.18, -143.28 (1.64%)
NASDAQ 1,571.59, -45.42 (2.81%)
S&P 500 890.35, -19.38 (2.13%)
NYSE Composite 5,703.69, -133.45 (2.29%)
Again, the numbers surely should have surprised exactly nobody, yet the markets responded in the usual pattern of lost hope and near-desperation. They sold in the morning and sold more in the late afternoon.
Declining issues outweighed advancers by a large margin, 4714-1871, though the 5-2 ratio is hardly demonstrative of the market's true weakness. For that, two other readily-available indicators are more poignant: The new highs-new lows ratio and overall volume. New lows outnumbered new highs, 90-30, and while that margin is not great, the persistence of its one-sidedness is remarkable. As for volume, it gets weaker by the day. More and more investors are pulling out of positions and redemptions from funds are still running, at a slower pace than 3 months ago, but that's only because the overall fund balances and holders are smaller.
NYSE Volume 1,158,510,000
NASDAQ Volume 1,946,649,000
Volumes were absolutely pathetic, and they're likely to get even smaller as more players head for the benches. Obviously, those who didn't exit positions on Wednesday, did so on Friday.
Commodities made marginal moves, which is understandable, especially considering the amount of debate over President-elect Obama's thinly-outlined recovery plan, announced Thursday, and rounded beaten up and down since. Oil dropped 93 cents, closing at $40.83. Gold struggled to gain just 50 cents, closing at $855.00, though silver stood apart, gaining 22 cents to finish at $11.32 (lest I remind anyone for the umpteenth time that silver is my #1 pick for 2009).
The coming days and weeks do not bode well for investors of any stripe, unless you're super smart and super short this market. The entire nation is sluggish and on hold until the 20th of January, when the new administration officially takes over. 10 days and counting.
This first full week of January provided a little bit of a glimpse of what the rest of the year is going to look like, and it isn't pretty. After going straight up on Friday of last week, the markets went straight down through the week, ending with a loud thud on Friday that sent all the major indices into negative territory for the year. Lest we not forget, the January Barometer - which has proven to be 91% accurate - says, in a nutshell, as goes January, so goes the year. 2009 is not shaping up to be very good at all.
I've actually been quite amused by the number of supposedly "smart" people who are still encouraging people to hold onto their 401k funds, keep them in stocks, "because they always rebound" and other such nonsense. Stocks are sure to bounce off their lows, but they're probably not even close to their absolute bottoms yet. The number of bankruptcies by listed companies in 2009 is going to astound even these "experts," especially the ones who said recovery will begin in the second half of the year.
Anyone currently accumulating either cash, gold, silver or all of the above will be rewarded handsomely at the end of this corrective period, whenever that is... 2010, 2011 or later.
What sank the indices on Friday was no surprise announcement. The Bureau of Labor Statistics, that august group of number massagers, pronounced on Friday morning that the US had shed another 524,000 jobs in December, and that's almost surely off by at least 100,000. The number ADP applied to December job losses on Wednesday was 693,000, and that's more believable, though the stock pushers will gladly take the "official" government number as gospel (or at least that's what they'll tell their clients), being that it's 1/3 smaller than reality.
Dow 8,599.18, -143.28 (1.64%)
NASDAQ 1,571.59, -45.42 (2.81%)
S&P 500 890.35, -19.38 (2.13%)
NYSE Composite 5,703.69, -133.45 (2.29%)
Again, the numbers surely should have surprised exactly nobody, yet the markets responded in the usual pattern of lost hope and near-desperation. They sold in the morning and sold more in the late afternoon.
Declining issues outweighed advancers by a large margin, 4714-1871, though the 5-2 ratio is hardly demonstrative of the market's true weakness. For that, two other readily-available indicators are more poignant: The new highs-new lows ratio and overall volume. New lows outnumbered new highs, 90-30, and while that margin is not great, the persistence of its one-sidedness is remarkable. As for volume, it gets weaker by the day. More and more investors are pulling out of positions and redemptions from funds are still running, at a slower pace than 3 months ago, but that's only because the overall fund balances and holders are smaller.
NYSE Volume 1,158,510,000
NASDAQ Volume 1,946,649,000
Volumes were absolutely pathetic, and they're likely to get even smaller as more players head for the benches. Obviously, those who didn't exit positions on Wednesday, did so on Friday.
Commodities made marginal moves, which is understandable, especially considering the amount of debate over President-elect Obama's thinly-outlined recovery plan, announced Thursday, and rounded beaten up and down since. Oil dropped 93 cents, closing at $40.83. Gold struggled to gain just 50 cents, closing at $855.00, though silver stood apart, gaining 22 cents to finish at $11.32 (lest I remind anyone for the umpteenth time that silver is my #1 pick for 2009).
The coming days and weeks do not bode well for investors of any stripe, unless you're super smart and super short this market. The entire nation is sluggish and on hold until the 20th of January, when the new administration officially takes over. 10 days and counting.
Thursday, January 8, 2009
Retail Slump, Obama Pump, Pain All Around
Stocks ended the day mixed, amid poor retail results and fear of huge job losses continuing through Spring. The overhanging fear of the government's Friday's Nonfarm Payroll report showing a second consecutive month of more than 500,000 job losses in December was palpable. Nevertheless, stocks rallied off mid-day lows for gains in all indices save the Dow.
Dow 8,742.46, -27.24 (0.31%)
NASDAQ 1,617.01, +17.95 (1.12%)
S&P 500 909.73, +3.08 (0.34%)
NYSE Composite 5,837.14, +38.09 (0.66%)
Retail sales for December were released by a variety of major chains, and the results, fully expected, showed mass declines, despite 50-7-% markdowns throughout the important holiday season. Among the highlights for same-store sales:
Well, as apples go, that's a bunch of bruised, rotting fruit.
Shortly after 11:00 am, President-elect Barack Obama issued a terse pre-inaugural speech on his proposed American Recovery and Reinvestment Plan (ARRP). Obama outlined plans to jump-start four major areas of interest: health care, education, energy and infrastructure. The ideas put forward included retrofitting federal buildings with smart or green-tech energy solutions, providing computers and technology to schools, money for road, bridge and building projects that are shovel-ready and in need of funding and computerization of medical records, to name just a few.
The ARRP also is proposed to include incentives to business, plus a $1000 tax break for "95% of middle class taxpayers." Obama directed his speech primarily to legislators in congress, urging them to put aside partisanship and special interests in favor of "what's good for America." The speech was short - about 15 minutes - and lacking in specifics, though one cannot fault the President-elect on that account, since he is not yet officially our head of state.
Markets, which had recovered from earlier declines, fell back into or further into the red. The Dow, in particular, remained underwater, sinking roughly 100 points by the end of the speech. It is entirely possible that Wall Street may not like what Obama is proposing, because he may actually take on the players, CEOs, regulators, crooks and criminals who caused the economic issues we are currently enduring. If Obama is true to his word, Wall Street firms will be forced to commit to more accountability and scrutiny than has existed for the past 20 years.
If the election of Barack Obama was a truly historic event, then his proposals may prove to be the kind of stimulus which at least limits the pain of the economic downturn and shortens its duration. That's about as much as we can hope for from a new president inheriting a set of economic conditions that are the worst in at least 80 years.
Change is surely in the wind, and Wall Street, already dead, may be setting up for the burial ritual in which financial firms and companies overloaded with debt are quickly dispatched, destroyed in value and liquidated. That is the message coming from Washington. Wall Street and the investment community would be wise to heed the headwinds blowing from the Potomac to the Hudson.
Obama's plan - depending on how badly congress distorts the original intent - is likely to be good for Main Street and ranging from neutral to bad for Wall Street. Tough luck for those who refuse to change, upgrade and grow into the 21st century.
There is still plenty of excess, overhang and waste that has yet to be discounted in the stocks which constitute the major indices, though all indications are that investors will seek more transparency and accountability from publicly-traded firms. The discounting mechanism that is the stock exchange should manage to squeeze out the remaining overvaluations.
On the day, advancing issues outflanked decliners, 4002-2574. New lows remained stubbornly ahead of hew highs, 87-27.
Volume remains light, likely a permanent feature in the new paradigm of the US stock markets until the economy begins to recover, at least. Many participants are sitting on the sidelines or seeking safer havens for their money. The associated rise in the number of bond issuance offers a clue to just how fearful or dissuaded investors have become,
NYSE Volume 1,196,486,000
NASDAQ Volume 2,011,787,000
Commodities were also mixed. Oil dipped 93 cents, to $41.70. Gold gained $12.80 to $854.50. Silver dropped a penny, closing at $11.10.
The upcoming Nonfarms Payroll report, due to be released at 8:30 Friday morning, may have already been discounted on Wednesday, when private payroll firm ADP announced their figure of 693,000 jobs lost in December. Thus, it's a 50-50 proposition on whether stocks will rally or sell-off tomorrow. ADP seems to have taken some of the sting out of the government report. Investor reaction should be more measured than normal.
Dow 8,742.46, -27.24 (0.31%)
NASDAQ 1,617.01, +17.95 (1.12%)
S&P 500 909.73, +3.08 (0.34%)
NYSE Composite 5,837.14, +38.09 (0.66%)
Retail sales for December were released by a variety of major chains, and the results, fully expected, showed mass declines, despite 50-7-% markdowns throughout the important holiday season. Among the highlights for same-store sales:
- Wal-Mart was the only company reporting an increase in same-store sales, +1.2%
- Costco -4%
- Sears -7.3%
- Macy's -4%
- Saks Fifth Avenue -19.8%
- Limited Brands -10%
- Gap -14%
- Abercrombie & Fitch -24%
- Williams-Sonoma -24%
- Dillard's -5%
- Target -4.1%
- Kohl's -1.4%
- JC Penny's -8.1%
Well, as apples go, that's a bunch of bruised, rotting fruit.
Shortly after 11:00 am, President-elect Barack Obama issued a terse pre-inaugural speech on his proposed American Recovery and Reinvestment Plan (ARRP). Obama outlined plans to jump-start four major areas of interest: health care, education, energy and infrastructure. The ideas put forward included retrofitting federal buildings with smart or green-tech energy solutions, providing computers and technology to schools, money for road, bridge and building projects that are shovel-ready and in need of funding and computerization of medical records, to name just a few.
The ARRP also is proposed to include incentives to business, plus a $1000 tax break for "95% of middle class taxpayers." Obama directed his speech primarily to legislators in congress, urging them to put aside partisanship and special interests in favor of "what's good for America." The speech was short - about 15 minutes - and lacking in specifics, though one cannot fault the President-elect on that account, since he is not yet officially our head of state.
Markets, which had recovered from earlier declines, fell back into or further into the red. The Dow, in particular, remained underwater, sinking roughly 100 points by the end of the speech. It is entirely possible that Wall Street may not like what Obama is proposing, because he may actually take on the players, CEOs, regulators, crooks and criminals who caused the economic issues we are currently enduring. If Obama is true to his word, Wall Street firms will be forced to commit to more accountability and scrutiny than has existed for the past 20 years.
If the election of Barack Obama was a truly historic event, then his proposals may prove to be the kind of stimulus which at least limits the pain of the economic downturn and shortens its duration. That's about as much as we can hope for from a new president inheriting a set of economic conditions that are the worst in at least 80 years.
Change is surely in the wind, and Wall Street, already dead, may be setting up for the burial ritual in which financial firms and companies overloaded with debt are quickly dispatched, destroyed in value and liquidated. That is the message coming from Washington. Wall Street and the investment community would be wise to heed the headwinds blowing from the Potomac to the Hudson.
Obama's plan - depending on how badly congress distorts the original intent - is likely to be good for Main Street and ranging from neutral to bad for Wall Street. Tough luck for those who refuse to change, upgrade and grow into the 21st century.
There is still plenty of excess, overhang and waste that has yet to be discounted in the stocks which constitute the major indices, though all indications are that investors will seek more transparency and accountability from publicly-traded firms. The discounting mechanism that is the stock exchange should manage to squeeze out the remaining overvaluations.
On the day, advancing issues outflanked decliners, 4002-2574. New lows remained stubbornly ahead of hew highs, 87-27.
Volume remains light, likely a permanent feature in the new paradigm of the US stock markets until the economy begins to recover, at least. Many participants are sitting on the sidelines or seeking safer havens for their money. The associated rise in the number of bond issuance offers a clue to just how fearful or dissuaded investors have become,
NYSE Volume 1,196,486,000
NASDAQ Volume 2,011,787,000
Commodities were also mixed. Oil dipped 93 cents, to $41.70. Gold gained $12.80 to $854.50. Silver dropped a penny, closing at $11.10.
The upcoming Nonfarms Payroll report, due to be released at 8:30 Friday morning, may have already been discounted on Wednesday, when private payroll firm ADP announced their figure of 693,000 jobs lost in December. Thus, it's a 50-50 proposition on whether stocks will rally or sell-off tomorrow. ADP seems to have taken some of the sting out of the government report. Investor reaction should be more measured than normal.
Wednesday, January 7, 2009
Stocks Slammed on Bleak Employment Numbers
Why investors were surprised at the wickedly bad numbers contained in the ADP National Employment Report [PDF] is a mystery. That they sold off stocks in such a panicky manner is testament to the futility of US equity markets in what eventually will be known as either "The Second Great Depression" or "The Greater Depression" or something even more depressing.
After the US Dept. of Labor recorded over 500,000 job losses for November, and traders fretfully awaited the Non-farm Payroll report on Friday, private firm ADP beat everyone to the punch by a couple of days. It should be noted that ADP's figures are probably more reliable than the overly massaged and managed government numbers since ADP processes 1 out of every 5 private payrolls in the US and they have no vested interest in working the figures one way or the other.
The report, released prior to the opening bell, said the private sector shed some 693,000 jobs in December, a number so large that it defies usual comprehension. It's like putting the entire adult population of a large population center - think Dallas or San Diego - out of work in just a month's time. The devastating loss of jobs, most in the retail and service sector (we've already decimated the goods-producing sector) is the furtherance of the great unwinding and destruction of the US economy.
Looking outward, all those lost jobs will ripple across the global economy, affecting every other nation from Denmark to Thailand to varying degrees. In the long run, nobody is going to be spared from the massive destruction of wealth through stock losses, and declining values in all asset classes.
Dow 8,769.70, -245.40 (2.72%)
NASDAQ 1,599.06, -53.32 (3.23%)
S&P 500 906.65, -28.05 (3.00%)
NYSE Composite 5,799.05, -169.79 (2.84%)
Of course, today's losses are only the beginning. The Dow and fellow major indices have been on something of a rally recently, and, having chalked up a huge gain on Friday, January 2, the first day of trading in 2009, are close to falling into negative territory for the year. The Dow already has, though only by a few points. This sudden reversal of fortune has surely caused some degree of consternation for the few bulls still standing, hoping for "recovery" before we've even hit bottom, but the sea change in sentiment is representative of bear markets, in which markets turn on a dime, or a whim, or, like today, on actual bad news.
As expected, declining issues far out polled advancers, 5071-1566, though that spread isn't even close to what it should be. A 3-1 ratio on a day like today, dominated by bad economic news, a warning from Intel and on the heels of Alcoa's announced layoffs of 13,000, is ridiculously short of expectations. How a quarter of companies can be seen positively is a question only those bidding them up can answer, but it speaks volumes to the lack of understanding of the seriousness of the malaise by market participants. New lows again beat back new highs, 86-18, and, since that trend has yet to be reversed, more declines in the indices - and individual stocks - are to be expected. Volume was not high, but on par with Tuesday, an improvement, though possibly this level is becoming the new normal.
NYSE Volume 1,233,276,000
NASDAQ Volume 2,060,124,000
It wasn't just equities taking a beating. Commodities suffered severe losses, especially oil, which fell $5.95, to $42.63, a 12% drop, on futures exchanges. Gold dropped $24.30, to $841.70, with silver dipping 34 cents, to $11.11. The deflationary environment is taking no prisoners, though the metals are likely to fare better than most asset classes. Incidentally, all food-related futures suffered substantial losses.
It's a good thing that food and fuel are getting cheaper by the minute, as those are just about the only things many people are going to be able to afford for some considerable time. Amazingly, the US economy has yet to reach rock bottom. That could be as long as a year or two away, but for many, including the more than ten million Americans who are already out of work, this winter surely must seem like the worst of times.
It's getting worse, a lot worse, and it's not going to get better any time soon.
After the US Dept. of Labor recorded over 500,000 job losses for November, and traders fretfully awaited the Non-farm Payroll report on Friday, private firm ADP beat everyone to the punch by a couple of days. It should be noted that ADP's figures are probably more reliable than the overly massaged and managed government numbers since ADP processes 1 out of every 5 private payrolls in the US and they have no vested interest in working the figures one way or the other.
The report, released prior to the opening bell, said the private sector shed some 693,000 jobs in December, a number so large that it defies usual comprehension. It's like putting the entire adult population of a large population center - think Dallas or San Diego - out of work in just a month's time. The devastating loss of jobs, most in the retail and service sector (we've already decimated the goods-producing sector) is the furtherance of the great unwinding and destruction of the US economy.
Looking outward, all those lost jobs will ripple across the global economy, affecting every other nation from Denmark to Thailand to varying degrees. In the long run, nobody is going to be spared from the massive destruction of wealth through stock losses, and declining values in all asset classes.
Dow 8,769.70, -245.40 (2.72%)
NASDAQ 1,599.06, -53.32 (3.23%)
S&P 500 906.65, -28.05 (3.00%)
NYSE Composite 5,799.05, -169.79 (2.84%)
Of course, today's losses are only the beginning. The Dow and fellow major indices have been on something of a rally recently, and, having chalked up a huge gain on Friday, January 2, the first day of trading in 2009, are close to falling into negative territory for the year. The Dow already has, though only by a few points. This sudden reversal of fortune has surely caused some degree of consternation for the few bulls still standing, hoping for "recovery" before we've even hit bottom, but the sea change in sentiment is representative of bear markets, in which markets turn on a dime, or a whim, or, like today, on actual bad news.
As expected, declining issues far out polled advancers, 5071-1566, though that spread isn't even close to what it should be. A 3-1 ratio on a day like today, dominated by bad economic news, a warning from Intel and on the heels of Alcoa's announced layoffs of 13,000, is ridiculously short of expectations. How a quarter of companies can be seen positively is a question only those bidding them up can answer, but it speaks volumes to the lack of understanding of the seriousness of the malaise by market participants. New lows again beat back new highs, 86-18, and, since that trend has yet to be reversed, more declines in the indices - and individual stocks - are to be expected. Volume was not high, but on par with Tuesday, an improvement, though possibly this level is becoming the new normal.
NYSE Volume 1,233,276,000
NASDAQ Volume 2,060,124,000
It wasn't just equities taking a beating. Commodities suffered severe losses, especially oil, which fell $5.95, to $42.63, a 12% drop, on futures exchanges. Gold dropped $24.30, to $841.70, with silver dipping 34 cents, to $11.11. The deflationary environment is taking no prisoners, though the metals are likely to fare better than most asset classes. Incidentally, all food-related futures suffered substantial losses.
It's a good thing that food and fuel are getting cheaper by the minute, as those are just about the only things many people are going to be able to afford for some considerable time. Amazingly, the US economy has yet to reach rock bottom. That could be as long as a year or two away, but for many, including the more than ten million Americans who are already out of work, this winter surely must seem like the worst of times.
It's getting worse, a lot worse, and it's not going to get better any time soon.
Tuesday, January 6, 2009
Wall Street: DEAD AS A DOORNAIL
Economic reports dominated the headlines on Tuesday, where weakness in manufacturing, an all-time low in pending home sales and a release of the Fed's December meeting minutes were offset by a better-than-expected ISM Services reading for December of 40.6, up from 37.3 a month ago.
Preliminary figures provided by the US Census Bureau on manufacturers' shipments, inventories and orders was unsurprising but sobering. Following a 6% decline in October, new orders fell 4.6% in November, the 4th consecutive month of declines. Further, the inventories-to-shipments ratio rose again, from 1.33 to 1.41. Inventories are piling up on producers' shelves and in stores as the holiday season failed to produce a break in the negative trend in spending.
The Fed minutes (linked above) from the December meeting were released at 2:00 in the afternoon, just in time to rally the markets, though one would be hard-pressed to produce any positive spin, save that the Fed was prepared to expand its own balance sheet and make hefty open-market purchases of a wide range of mortgage and agency debt. While those purchases might alleviate some strain on stressed-out bankers, it only prolongs the drag on the economy until such a time that it becomes impossible to contain the downward price pressures of outright deflation.
Those minutes are an interesting read, if only to characterize the FOMC and the entire Federal Reserve as a roomful of fat, impotent old men in suits who think the economy can be maneuvered in whichever way they like through monetary policy. It's also useful in realizing that the Fed is essentially hell-bent on inflation as a major tool for their stated dual goals of full employment and price stability. The unfortunate reality for the fools of the Fed is that Keynesian economics never advocated outright inflation (or money creation out of thin air) as a tool for price stability. Proponents of the Austrian school of economics, in which no intervention is the preferred model, is probably going to have the last laugh when this episode of economic and moral turpitude has run its fatal course.
With the uneven news came an unsteady market, which opened higher, collapsed just after 10:00 am and staged a late-session recovery, with the major indices finishing moderately higher.
Dow 9,015.10, +62.21 (0.69%)
NASDAQ 1,652.38, +24.35 (1.50%)
S&P 500 934.70, +7.25 (0.78%)
NYSE Composite 5,968.84, +60.41 (1.02%)
The good news is that better volume has finally returned as volatility continues to decline. The entire day's range for the Dow was a mere 148 points. More good news came from the internal data showing advancers far ahead of declining issues, 5010-1661. New lows remained stubbornly ahead of new highs, 94-40.
NYSE Volume 1,334,630,000
NASDAQ Volume 2,179,892,000
As for direction, there are dithering indicators. The new high-new low metric refuses to break and stocks seem to be stuck at resistance in the 9000-9100 level on the Dow. There will need to be a significant catalyst to break through said resistance, and the December Non-farm Payroll report, due on Friday prior to the opening bell, isn't likely to produce anything approaching good news. Therefore, the emphasis must be on safety and risk aversion, as the market now seems poised for either a rally continuation or a sharp reversal. Something is going to give, and soon.
There seems to be a little more of an appetite for stocks, now that the average investor has lost a bundle and now sees equities as just about the only way out. It's a natural occurrence, as the old saying, time heals all wounds works equally well for investments as for romances. With stocks staging a slow recovery, investors may well be licking their chops over what seem to be enticing valuations.
Surely, stocks are cheap, but they are that way for a variety of reasons. As mentioned in previous posts, the rationale to steer clear of stocks at this juncture consists of interlinking parts: 4th quarter numbers are likely to be poor and will be reported - for the majority of companies - within weeks; the US and global economy are in the midst of the worst setback since WWII and recovery will be slow; government attempts to reinvigorate the economy have failed and have been costly; nothing has been done to affect the hundreds of thousands of people losing their homes and/or jobs, and whatever will be done will likely not be enough to offset the prevailing headwinds of slack demand and price deflation.
So, go ahead and jump in at your pleasure, but don't tell anyone you heard that advice here. I have been completely out of buy side positions since September, 2007, and continue to advise against stocks. Cash is the very best friend you've ever had right now. Real bargains have not yet begun to appear and won't until the housing market bottoms out and then stabilizes. That pair of events is still a good 12-18 months away.
I am so negative on stocks that I'm considering not even reporting on them any more as we move further toward a cash-based - as opposed to credit-based - economy. Distortions, disruptions and price permutations are going to be all over the map for the next two years in everything from car prices to used comic books. Value investors will have a field day buying distressed assets at rock-bottom prices.
Wall Street committed suicide by holding their own toxic blend of mortgage-backed securities (MBS) and structured investment vehicles (SIV) and is thus DEAD AS A DOORNAIL. The major banks are insolvent (as is the US government), lending is still occurring at a snail's pace and capital formation has been nearly entirely wiped out. 2009 will be remembered as the year in which globalization failed completely and all of the excesses of the past 20 years began to unwind in recognizable ways. Real job growth will not take place until at least October of this year, though probably later than that. There's nothing the government can do to prevent the unwinding, which is necessary and real, though they will spend $$$ trillions trying to stem the inevitable tide of foreclosures, liquidations, defaults and bankruptcies which must occur in order to restore function to both the financial and societal structure.
On the day, commodity prices see-sawed to a mixed close. Oil ended down slightly, by 23 cents, to $48.58. Precious metals reversed earlier selling to finish the day with gains. Gold was up $8.20, to $866.00, while silver added 18 cents, to $11.45.
At 5:00 pm, an hour after the close, Alcoa (AA) announced plans to slash 13,500 jobs and 1700 contractors in a cost savings measure.
Preliminary figures provided by the US Census Bureau on manufacturers' shipments, inventories and orders was unsurprising but sobering. Following a 6% decline in October, new orders fell 4.6% in November, the 4th consecutive month of declines. Further, the inventories-to-shipments ratio rose again, from 1.33 to 1.41. Inventories are piling up on producers' shelves and in stores as the holiday season failed to produce a break in the negative trend in spending.
The Fed minutes (linked above) from the December meeting were released at 2:00 in the afternoon, just in time to rally the markets, though one would be hard-pressed to produce any positive spin, save that the Fed was prepared to expand its own balance sheet and make hefty open-market purchases of a wide range of mortgage and agency debt. While those purchases might alleviate some strain on stressed-out bankers, it only prolongs the drag on the economy until such a time that it becomes impossible to contain the downward price pressures of outright deflation.
Those minutes are an interesting read, if only to characterize the FOMC and the entire Federal Reserve as a roomful of fat, impotent old men in suits who think the economy can be maneuvered in whichever way they like through monetary policy. It's also useful in realizing that the Fed is essentially hell-bent on inflation as a major tool for their stated dual goals of full employment and price stability. The unfortunate reality for the fools of the Fed is that Keynesian economics never advocated outright inflation (or money creation out of thin air) as a tool for price stability. Proponents of the Austrian school of economics, in which no intervention is the preferred model, is probably going to have the last laugh when this episode of economic and moral turpitude has run its fatal course.
With the uneven news came an unsteady market, which opened higher, collapsed just after 10:00 am and staged a late-session recovery, with the major indices finishing moderately higher.
Dow 9,015.10, +62.21 (0.69%)
NASDAQ 1,652.38, +24.35 (1.50%)
S&P 500 934.70, +7.25 (0.78%)
NYSE Composite 5,968.84, +60.41 (1.02%)
The good news is that better volume has finally returned as volatility continues to decline. The entire day's range for the Dow was a mere 148 points. More good news came from the internal data showing advancers far ahead of declining issues, 5010-1661. New lows remained stubbornly ahead of new highs, 94-40.
NYSE Volume 1,334,630,000
NASDAQ Volume 2,179,892,000
As for direction, there are dithering indicators. The new high-new low metric refuses to break and stocks seem to be stuck at resistance in the 9000-9100 level on the Dow. There will need to be a significant catalyst to break through said resistance, and the December Non-farm Payroll report, due on Friday prior to the opening bell, isn't likely to produce anything approaching good news. Therefore, the emphasis must be on safety and risk aversion, as the market now seems poised for either a rally continuation or a sharp reversal. Something is going to give, and soon.
There seems to be a little more of an appetite for stocks, now that the average investor has lost a bundle and now sees equities as just about the only way out. It's a natural occurrence, as the old saying, time heals all wounds works equally well for investments as for romances. With stocks staging a slow recovery, investors may well be licking their chops over what seem to be enticing valuations.
Surely, stocks are cheap, but they are that way for a variety of reasons. As mentioned in previous posts, the rationale to steer clear of stocks at this juncture consists of interlinking parts: 4th quarter numbers are likely to be poor and will be reported - for the majority of companies - within weeks; the US and global economy are in the midst of the worst setback since WWII and recovery will be slow; government attempts to reinvigorate the economy have failed and have been costly; nothing has been done to affect the hundreds of thousands of people losing their homes and/or jobs, and whatever will be done will likely not be enough to offset the prevailing headwinds of slack demand and price deflation.
So, go ahead and jump in at your pleasure, but don't tell anyone you heard that advice here. I have been completely out of buy side positions since September, 2007, and continue to advise against stocks. Cash is the very best friend you've ever had right now. Real bargains have not yet begun to appear and won't until the housing market bottoms out and then stabilizes. That pair of events is still a good 12-18 months away.
I am so negative on stocks that I'm considering not even reporting on them any more as we move further toward a cash-based - as opposed to credit-based - economy. Distortions, disruptions and price permutations are going to be all over the map for the next two years in everything from car prices to used comic books. Value investors will have a field day buying distressed assets at rock-bottom prices.
Wall Street committed suicide by holding their own toxic blend of mortgage-backed securities (MBS) and structured investment vehicles (SIV) and is thus DEAD AS A DOORNAIL. The major banks are insolvent (as is the US government), lending is still occurring at a snail's pace and capital formation has been nearly entirely wiped out. 2009 will be remembered as the year in which globalization failed completely and all of the excesses of the past 20 years began to unwind in recognizable ways. Real job growth will not take place until at least October of this year, though probably later than that. There's nothing the government can do to prevent the unwinding, which is necessary and real, though they will spend $$$ trillions trying to stem the inevitable tide of foreclosures, liquidations, defaults and bankruptcies which must occur in order to restore function to both the financial and societal structure.
On the day, commodity prices see-sawed to a mixed close. Oil ended down slightly, by 23 cents, to $48.58. Precious metals reversed earlier selling to finish the day with gains. Gold was up $8.20, to $866.00, while silver added 18 cents, to $11.45.
At 5:00 pm, an hour after the close, Alcoa (AA) announced plans to slash 13,500 jobs and 1700 contractors in a cost savings measure.
Subscribe to:
Posts (Atom)
Posts
