Geithner's Wall Street Cram-Down

It was pretty evident that Wall Street didn't like what Treasury Secretary Timothy Geithner was telling them when he began outlining the details of TARP II, the $350 billion Obama administration's side of the original $700 billion plan approved in October of 2008.

Stocks were already trading lower when Geithner stepped to the mic, but they really tanked as he drilled out scant details of the government's plan. The Dow was down about 45 points when he started speaking at 11:00 am. By the time he was finished, just a half hour later, the blue chip index was off nearly 300. Matters proceeded to become materially worse from there. The Dow was down more than 400 points before a last-gasp rally trimmed the losses by about 40 points in the final 15 minutes.

Dow 7,888.88, -381.99 (4.62%)
NASDAQ 1,524.73, -66.83 (4.20%)
S&P 500 827.17, -42.72 (4.91%)
NYSE Composite 5,214.34, -265.54 (4.85%)

Some of the more vocal Wall Street banking crowd are complaining that Geithner's plan - which reportedly has provisions for the assumption of some of the banks' toxic assets by private investors - is short on specifics.

The truth of the matter is that it likely opens the banks in question to too much public scrutiny, as evidenced by the government's new web site, financialstability.gov.

For a glimpse of what's ahead for the Bailout Bunch, the site currently links to Treasury's own Emergency Economic Stabilization Act web site. drilling down just a page reveals, under "Systemically Significantly Failing Institutions" we find reams of info on Bank of America, Goldman Sachs, Morgan Stanley, Citigroup, JP Morgan Chase, Wells Fargo & Co., Bank of New York Mellon, State Street, Merrill Lynch, AIG, plus Chrysler, General Motors and GMAC.

How appropriate and sweetly ironic that these banks and businesses are grouped under such a heading. Most, if not all, are already insolvent. Bloggers and economists should have a field day with all the fresh light shining on these cheaters, liars and scoundrels. There's a wealth of information there, much of it which will almost surely facilitate the demise of these failed firms.

Could the government actually be forcing the banks to confess to their excess and the extent of their failures? It sure looks that way, and, if so, it's a great step forward. Wall Street fails to see it that way, but, clue to the clueless, Wall Street isn't America and the fate of 300 million Americans is not inexorably tied to the ups and downs of the Dow Jones Industrials.

Main Street may finally be catching a break as the banks are forced to come clean, which means that a good number of them will be forced into bankruptcy and/or liquidation, the key step in ridding the market of malinvestments and failed institutions.

Could it be that Secretary Geithner, under the thumb of President Obama, has finally gotten religion and intends to actually correct the mess that he was already a party to? Could be. Obama's sincerity and forthrightness was on display just last night at his first press conference when he left the door a bit ajar in his response to a reporter's question about investigating former administration officials.

His response to a question about Senator Patrick Leahy's calling for a "truth commission" was decidedly grey-area, as the President said much to the affect that while he preferred to "look forward" he would not block investigative efforts. Between those comments and the Geithner cram-down on Wall Street, maybe real healing in America can begin.

This writer honestly hasn't felt this good about a serious market tumble since the dot-com bust, the key being Geithner's fairly obvious signal that the rules have changed and the hand-outs and free rides are now relics of the past.

Advancing issues were absolutely overwhelmed by decliners in the broadest selling since November. Losers led gainers, 5405-1145, a nearly 5-1 edge. New lows continued to strengthen ahead of new highs, 203-19. A major part of the story was volume, which was very strong, indicating that this bust was the real deal.

NYSE Volume 1,757,078,000
NASDAQ Volume 2,473,252,000

Financial stocks took a beating, especially the most egregious offenders. Bank of America (BAC) lost 1.33 to close at 5.56 (-19.30%). There was false hope recently as BofA rallied from below $4 to above $6, a level at which major funds could still participate. It now looks to fall below $5 again, signaling a continuance of the classic death spiral.

Ironically, this stock looks very much like Countrywide did in January of 2008, after Bank of America had assumed most of the company's assets. Countrywide eventually was fully assumed by Bank of America. Much of the same bad debt which killed that company are now crushing CEO Ken Lewis' company. Bank of America has been insolvent for quite some time and it will be interesting to watch the continuing saga of what was once America's largest banking interest.

Citigroup (C), another of the walking dead, was hammered 0.60, to 3.35 (-15.19). This company's future may be numbered in weeks rather than months.

Goldman Sachs (GS) was hard hit, dropping 7.49, to 90.40 (-7.65%). Morgan Stanley (MS)lost 2.82, to 20.79 (-11.95). JP Morgan Chase fell 2.66, to 24.62 (-9.75).

Commodities were mostly mixed with oil down substantially, losing 2.01, closing at $37.55, a three-week low. The metals were moving in the opposite directed, hurriedly. Gold shot up 21.40, to $914.20. Silver gained 30 cents, to 13.13.

The precious metals prices are signaling another flight to safety. Clearly, equities are not the place to be now, as they haven't been for the past 18 months, and they still won't be for some time even though today's decline could be interpreted as the beginning of the recovery. The dollar was up sharply against other currencies.

While our own corrupt bankers and wheedlers express themselves with outcries of fear and panic, smart money is on the greenback and gold, a combination that may not seem plausible at first, though it's better understood when seen in the light of a basic turnover of power. It's clear that the Obama administration is not going to tolerate much less than complete transparency. THAT is a very positive development.

Silver remains my #1 investment. On the other hand, opportunities may begin to emerge in black market tobacco and stinging race and sports fixers, the ultimate revenge play.

Today's losses were surely not the last, as the Dow closed at its lowest level since November 20 of last year and is also the first close since then below 7900. Wall Street is in serious jeopardy of breaking apart at the seams. Another precipitous move lower could be in the cards as the market must retest 7550 on the Dow, though that move actually seems a foregone conclusion after today.

It was a poor day for Wall Street, but a darned good one for the United States of America.

Markets Flatline Awaiting Stimulus

Stocks traded in narrow ranges on the major indices Monday as investors awaited congressional delegations to reconcile differences in the Senate and House versions of the massive $800 billion government stimulus bill.

While Washington fiddles, Wall Street diddles, indeed. The Dow barely surpassed a 100-point full-session range. The S&P 500 never moved more than 7-points off of no change, finishing with a minimal gain of 1.29, joining the NYSE on the upside, while the Dow and NASDAQ ended lower.

Dow 8,270.95, -9.64 (0.12%)
NASDAQ 1,591.56, -0.15 (0.01%)
S&P 500 869.89, +1.29 (0.15%)
NYSE Composite 5,479.86, +4.58 (0.08%)

The imperfect storm included a lack of corporate reports, scarce economic news and a delay in the highly-anticipated "TARP II" bailout plan for major financial firms.

Lethargic conditions resulted in a severe lack of volume and volatility. Maybe everybody just needed a break from the steady salvo of bad news, inquisition and recrimination. Word is out that the global economy is quitting, the question is over haw bad it will become and whether any government plan can stem the tide of defaults, layoffs and deflation.

On the day, advancing and declining issues were virtually split, with advancers ahead, 3279-3221. New lows continued to outnumber new highs, 115-19. The volume figures, as mentioned, were rather anemic.

NYSE Volume 1,257,726,000
NASDAQ Volume 1,912,234,000

The major tracking commodities deflated as crude oil closed near its session lows at $39.56 per barrel, down 61 cents. Gold fell $21.50, to $892.80, with silver slipping 23 cents, ending at $12.83 the ounce in New York.

There was so little to report on today, even I am at a loss for words.

Bear Market Rally Like Crack Cocaine

2:35 pm : The stock market sports strong gains near session highs. Beaten down industry groups top the leader board -- homebuilding (+16%), diversified financial services (+14%), regional banks (+14%), diversified banks (+12%), auto parts and equipment makers (+12%).

The above quote is from briefing.com, noted as the markets approached the highs of the day on Friday. As I noted earlier today, the market has absolutely rejected the obvious, continuing stream of bad news, including January's horrific jobs numbers (-598,000), released prior to the market's opening bell by the Bureau of Labor Statistics (BLS).

So, is this "irrational exuberance?" A little of that. The mainstream-obviated financial press is attributing the rise in equities to anticipation of congress passing a stimulus bill, presumably by tonight. There's probably a little of that, too, but the truth probably lies somewhere between the PPT and the fact that Bank of America stock had fallen below $5.00 per share on Wednesday, and our great and glorious financial leaders could not stomach the thought that investment and pension funds would not - by charter - be able to throw more cash down that rat hole of a "bad bank." Throw in a teaspoon of short-covering and viola! Bear market rally.

Rallies like this, in the midst of a serious recession, are like crack cocaine: a great rush, but it doesn't last and the crash is difficult. We've all seen them before and, judging by past experience, this one is just a lot of noise, indicative of nothing in particular except for the assertion that investors can be herded more readily than cats.

Bank of America was the among the biggest winners of the day, gaining 31% at one point of the activities. The stock finished the session with a nifty 1.29 point gain, closing at 6.13, up 26.65%.

But take a gander at those industry groups leading the rally. Banks? Homebuilders? Auto Parts? Aren't these the same companies needing bailouts and TARPs? This was another in a series of well-orchestrated pumping by the "invisible hand" of government and financial firms afraid of losing their grip on the American psyche. Naturally, jacking the stock markets is only a temporary solution.

Another irony of our day is the news that many of the banks and institutions receiving TARP funds - now that severe restrictions have been placed upon them, like limits on executive compensation - banks are turning away from government largess and Bank of America's CEO, Ken Lewis (left), says his firm won't need any more.

Is Lewis to be believed? Probably not. Bank of America is technically insolvent. Besides, his bank has already received $45 billion in direct funding, plus another $118 billion in government loan guarantees. Let's hope BofA doesn't need any more money.

Here's some more proof of the extent of insider meddling in today's (and every day's) trading. Look at how closely the indices tracked by percentage gain. Absolute lock-step. Unusually aligned.

Dow 8,280.59, +217.52 (2.70%)
NASDAQ 1,591.71, +45.47 (2.94%)
S&P 500 868.60, +22.75 (2.69%)
NYSE Composite 5,475.28, +149.27 (2.80%)

To say that today's gains are illusory or fantastical might be putting too fine a point on it, so I'll patiently wait until stocks on the Dow (of which every single one was higher today) revert to the norm at 8149, pulled down by the absolute weight and unshakable might of pure market dynamics. The Dow can only go so far for so long before retesting the lows set last November. How far and how long you ask? A few hundred points (maybe a top at 8600, though that's doubtful) and about another month at the outside. Sooner or later reality rears it's pretty head and investors head elsewhere, profits in hand.

On the day, advancing issues hammered decliners, by a heavy margin, 5137-1446. New lows remained atop new highs, 144-22. Volume, as it was yesterday, was strong, not surprising, considering how much money went into bidding up stocks that should have been going down.

NYSE Volume 1,611,600,000
NASDAQ Volume 2,429,589,000

Commodities continued under some pressure, which is normal. Oil futures finished a volatile session down $1.00, at $40.17. Gold barely budged, picking up 10 cents to $914.30. Silver's advance was the sharpest of all, up 41 cents, to a multi-month high of $13.16.

The stock indices all registered gains for the week, snapping four-week losing streaks and posting the first weekly gain of 2009. Direction is still down, though point-and-figure chartists will note a reversal here. Considering the depth of economic despair the country and globe is encountering, this doesn't seem to be much of a sustainable trend.

SPECIAL: Markets Off Course, Major Correction Coming

This is a special report on the unusual action in US equity markets this morning. Our usual recap will be posted around 5:00 today.

Last night, well after markets closed, News Corp. (NWSA) - the media conglomerate controlled by Rupert Murdoch - reported a loss of $6.4 billion in its most recent quarter.

This morning, paper and pulp producer Weyerhaeuser (WY) posted a 4th quarter loss of more than $1.21 billion, or $5.73 a share, from a loss of $63 million, or 30 cents a share, a year ago.

An hour prior to the opening bell, the Bureau of Labor Statistics reported job losses of 598,000 in January and a jump in the "official" unemployment rate to 7.6%.

So, naturally, at the open, the major US equity indices went straight UP. What's that you say? Doesn't make any sense?

Well, you're right. As I mentioned briefly yesterday, and the day before, and many times prior to that, US MARKETS ARE RIGGED.

As I write, I am watching stocks race towards the sky, with the Dow up 180 points, the NASDAQ higher by 33 and the S&P ahead by 17.

Speaking of the S&P, Standard & Poor's Index Services reports that it expects dividends for components of its S&P 500 Index to drop 13.3% this year. More bad news, right?

Stocks are higher, based on absolutely nothing but hype, not even hope! Zounds!

As a bonus, here's Peter Schiff on why the stimulus package is going to make things worse:



And...

"If the American people ever allow the banks to control the issuance of their currency.. the banks and corporations that will grow up around them will deprive the people of all property, until their children wake up homeless on the continent their fathers conquered."

- Secretary of State Thomas Jefferson

Anyhow, look for stocks to stop rallying on this semi-short squeeze and tank below 7500 in the near future. I'll be back later to report on how the rest of the day went.

Bad News Rally? Really?

Once the opening bell rang, investors knew what to do after seeing the latest round of initial unemployment claims coming in at a record number, 626,000. All of the major indices dropped right out of the gate, building losses until right around 10:30 am, with the usual suspects, banks and related financial firms, leading the way.

Adding to the early Thursday thumping was the 4th quarter report from Cisco (CSCO), along with a very disappointing outlook for Q1 of 2009.

Additionally, a slew of retailers reported same-store sales falling in the range of 15-25% in January. Overall, there wasn't much good news about.

But, then word hit the street that “mark-to-market” accounting rules might be suspended to provide additional relief to banks and financial institutions. In other words, banks would be able to hide bad debts deep in the bowels of their books. Fine. Dandy. More phony accounting should be just the elixir to pull the nation out of its deflationary tailspin.

I have a word for what the government has been doing and continues to do regarding the banks. It's called "manipulation."

Massaging the bank's books aren't going to magically make the bad paper go away. Toxic CDO and MBS are bad, plain and simple. Allowing the banks to put them into a tier of liabilities or assets that doesn't realistically reflect their market value only delays the eventual reckoning. It was the suggested "mark to model" accounting, by which the banks were able to conceal their liabilities in the gobbledegook of their accounting which was largely responsible for the entire mess to begin with. Now, the "change agents" in the federal government believe that a return to those failed and false standards will somehow turn the tide.

Rubbish. Absolute garbage and trash. The government has no silver bullet. The answer is to allow the market to function by bankrupting all of the major players (Bank of America, Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley, et. al.) who are INSOLVENT. Instead, the government and Wall Street is conspiring to continue the rape of the American taxpayer by propping up these failed institutions. They are plotting nothing less than the destruction of the United States of America.

So, the market soars on the news. The Dow, in particular, turned a 110-point loss at 10:30 am to a 150-point gain just after noon. The other indices registered similar moves and finished at or near the highs of the day. Not surprisingly, the banking sector was up sharply.

Dow 8,063.07, +106.41 (1.34%)
NASDAQ 1,546.24, +31.19 (2.06%)
S&P 500 845.85, +13.62 (1.64%)
NYSE Composite 5,326.01, +83.26 (1.59%)

So, there you have it. Bad news almost all around, but because the feds offer easier accounting rules, everything is magically worth more today than yesterday. Not only is our government completely off the rails, they are taking all of the money with them through the corrupt, failed banking system. If Americans ever understand the truth rather than accepting the pablum spoon-fed to them daily by the equally-complicit mainstream media, there would be marches and sit-ins in Washington which would make the record crowds at Obama's inauguration look like a high-school picnic - that is, if the American people somehow rediscover their spines.

Of course, most of the American population has been placated by either poverty, the media, handouts (welfare and extended unemployment benefits) or a noxious combination of all three. Largely, the American public is a brain-dead, limp and nearly lifeless non-entity. They don't have a voice in their politics and those who actually understand what's happening are marginalized as kooks or conspirators. Our rights have been gradually stripped away (and not restored by the current administration) to the point at which we barely matter. Congress and the president do as they please. Wall Street openly steals billions of dollars. Americans pay their bills, struggle to make ends meet, try to get by, hundreds of thousands of Kentuckians are still in the dark and cold, recalling images of hurricane Katrina and the aftermath of New Orleans. Sick. Sick Sick.

Tracking the day's trends, advancing issues beat back losers, 4155-1308, but, new lows continued to hold a large edge over new highs, 288-12. Volume was very high, especially at the open (down) and into the close (flat) as the powers at work threw everything they had into the market to prevent the dissipation of the day's gains. The bull-bear struggle from 3:30 to 4:00 pm was monumental, even though the indices barely budged.

NYSE Volume 1,627,892,000
NASDAQ Volume 2,563,955,000

Commodity markets responded as would be expected. Oil rose by 85 cents, to $41.17. Gold was up $12.00, to $914.20; silver advanced another 28 cents, to $12.75.

Naturally, all the efforts of the pumpers and pimps of the market could not overcome the monumental resistance line set up at 8149 on the Dow... not even coming close. Friday morning will prove to be quite interesting. The Bureau of Labor Statistics releases their non-farms payroll report for January at 8:30 am. The consensus is for another loss of 525,000 jobs. ADP has already (on Wednesday) released their independent figure for January at -522,000 jobs for January. Whichever way the BLS decides to massage their figures will decide the line of the day's trade. Anything significantly over their "consensus" figure should cause a decline. Anything at or below the figure will trigger a monster rally. Either way, its the sucker trade of the week, or year, or... well, there have been so many sucker moves lately that it may just fall in line with the rest of them.

Suck it up, America. The oligarchs cannot be inconvenienced.