Stocks Head Higher on Earnings News, Banking

It's a truly magical time to be trading in this market if you are one of the blissfully ignorant who merrily parade into stocks without regard to the past, present or future. Truth be told, I wish I were one of them, able to ignore unemployment claims which continue to rise unabated, blind to the tortuous machinations of the capital markets and with a positive, "can do" attitude about the American 21st century.

Had I been able to overlook the obvious strains on the national economy, I might have participated in this current rally. Instead, I have been either wrong or out of the market for the better part of the last two months, as, after plummeting by more than 50% in the past 18 months, stocks have rebounded positively and with no end in sight.

I suppose the minute I decide to go long, is when the markets will reverse course, thus I am staying on the sidelines for the time being.

Stocks were up moderately on all major indices, though the Dow seems stuck in place while the S&P and NASDAQ continue to lead the way. Apple (AAPL) and eBay (EBAY) led advances on the NASDAQ, though Microsoft reported after the bell the first quarterly decline in sales on a year-over-year basis in the company's 34-year history. Still, the company earned 39 cents per share after charges, which met analyst estimates and the stock traded 3% higher in the after-hours.

Dow 7,957.06, +70.49 (0.89%)
NASDAQ 1,652.21, +6.09 (0.37%)
S&P 500 851.92, +8.37 (0.99%)
NYSE Composite 5,372.10, +81.49 (1.54%)

As stocks continued their ascent, market internals did not conform to the headline numbers. Overall, advancing issues barely nudged past decliners, 3267-3143, with the bulk of the losers on the NASDAQ. Once again, there were more new lows than new highs, 62-20, continuing the long-standing bias in that indicator. Volume was solid, in line with recent days.

NYSE Volume 1,566,731,000
NASDAQ Volume 2,485,417,000

The session was somewhat volatile, though in a narrow range. All of the indices spent some time in the red, and most of the day's gains were posted in the final half-hour. It's a day-trader's market, and all of the money is being made on the buy side.

Over in commodities, oil gained 65 cents, to $49.50, while other energy components - such as natural gas - finished with losses. Foodstuffs were moderately lower overall, while the precious metals continued to advance. Gold finished the day up $14.10, to $906.60 and silver was even more sought-after, gaining 45 cents, to $12.76.

The unabated market advance has now lasted 32 sessions, of which 14 have been to the downside, though a good number of them - 8 - have been minor, five of those being marginal losses of less than 50 points on the Dow. The 18 sessions which showed gains were far more robust, though many of those occurred in the early stages of the rally, in mid-March, when the Dow galloped ahead 1350 points in a span of ten sessions. The past 22 sessions have seen a top (just 290 points higher) and retreat on the Dow, putting the widely-watched index, as of today, just 182 points above the high-water mark of 7775 reached on March 23.

Noting the slowdown in the advance, a breakout to the upside is about as plausible now as a downturn. About 10 days ago, I mentioned that stocks would trade in a sideways manner, which is essentially what's going on, though there have been notable gains in technology, banking and other sectors during recent days.

All of the major indices are actually exhibiting the same pattern, although the NASDAQ has outperformed them all. The NASDAQ charts are somewhat troubling, however, as the appearance of multiple trading gaps have been a feature. The index has been boosted both higher and lower off previous day's closes, but gaps are significant signs of volatility and uncertainty, and sooner or later, all of them get filled. Just how long that process will take depends to a large extent on economic conditions, and reaction to them. Some say investors making money today are in denial of reality, while bulls - ever positive - point to various "signs" of improvement, and the notion that the banking crisis is not as severe as some believe.

Who is eventually proven right will likely take some time, though it certainly appears that there are good arguments on both the bullish and bearish side. One feature that's been particularly interesting - I'm afraid to call it anything other than that - is how many stocks are reporting lower overall revenues and declining growth but still meeting lowered expectations and being bid higher. Is the confidence in these companies misplaced, or are buyers stepping in at lowered valuations, seeing real bargains? It's probably a little bit of each, taken on a case-by-case basis.

Tomorrow's trade is likely to be indecisive, but the last week of April and the first one of May should produce some idea of direction. Chrysler's deadline is less than a week away, GM's future continues to be cloudy, the results of the bank stress tests are due May 4, April employment figures will provide more insight and the government's initial estimate of first quarter GDP are all on the table over the coming fortnight. It figures to be quite the wild ride.

Economic Realities Ignored by Propagandist Media

The media is doing a very nice job of covering up the real issues involving the US economy, the banks, TARP and Treasury's role in the massive fraud being foisted on the nation's public.

Yesterday, Tim Geithner's comments that the "vast majority" of US banks had sufficient capital were largely credited for pumping an afternoon market rally led by the financial sector. That tidbit was so widely reported that it brought back memories of Republican "talking points" to media outlets, all of which parroted the party line during the Bush years.

It now seems apparent that the press corps is still being led by nose rings pulled by the PR machine of the federal government. Much of the news that the government doesn't want the public to know about is widely dispensed by newspapers - which nobody reads anymore - and online, increasingly becoming the true fourth estate. Case in point is that at the very same time Treasury Secretary Tim Geithner was testifying that government programs were working, TARP Inspector General Neil Barofsky issued a scorching 250-page report detailing "staggering" fraud and waste inherent in the program, citing the more than 20 separate criminal investigations involving TARP, while criticizing the program's size as unwieldy and prone to abuse.

The controlled propaganda from D.C., the major TV networks and cable outlets is probably not going to be able to stem the tide of negatives which eventually will flood the secondary news media, on the internet, radio, financial newsletters and magazines. There is simply too much bad news for the mainstream media to blunt all of it. Just this morning, prior to the markets' opening, more bad news from the banking complex overwhelmed the investing community as Morgan Stanley (MS) reported a 1st quarter loss far in excess of analyst expectations. The company posted a loss of 57 cents a share ($177 million), swinging completely around from the profit of $1.41 billion, or $1.26 a share, generated in the first three months of 2008.

Analysts were looking for a loss of 8 cents a share in the quarter. This was a massive miss that everyone should notice, not just the investment community.

As it was, the Dow opened with a loss of just 75 points, with other indices responding in similar ho-hum fashion, no doubt due to excess upside pressure being exerted by the brokerages which control most of the trading. By 10:00 am, the Dow, S&P and NASDAQ had already turned positive and headed higher, begging the question of just how much bad news will it take to make the markets respond in anything close to realism?

While control issues of the media and the markets become more apparent, maybe the Machiavellian nature of this episode in American history will become more apparent with today's apparent suicide of acting chief financial officer of troubled mortgage giant Freddie Mac.

According to reports, 41-year-old David Kellerman was a lifer at Freddie, having worked his way up from his analyst position in 1992 all the way to the executive suite. His death brings into play many questions, because he - of all people - was a man who may have known too much. Did Kellerman kill himself because he was being set up for a fall, or was the suicide another "black op" designed to silence him from going public on matters that might expose key politicians or people on their staffs?

Either case is damning to the government, as they attempt to plug every leak in their quickly-sinking ship of state. Fannie Mae and Freddie Mac are linchpins in the entire financial meltdown that have yet to be adequately exposed. They are both severely undercapitalized and without enormous injections of government money, would be insolvent. Even with the massive funding from the government, they are already deeply underwater.

Also being represented on the national airwaves, Chrysler and GM's dire straits. Both companies continue to inch closer to bankruptcy. In Chrysler's case, such a scenario would mean liquidation. GM might be able to restructure in an orderly proceeding, though tens of thousands of jobs would be lost. Chrysler faces a May 1 deadline to reach a merger agreement with Italian automaker Fiat, itself under severe strain from declining auto sales.

Separately, General Motors announced late Wednesday that they may close some plants for up to 9 weeks this summer to save money. The automaker, once the pride of US industrial might, faces a government-imposed June 1 deadline to craft a workable plan to receive more federal aid. The alternative is bankruptcy, though even those closest to negotiations are unclear as to how such a plan would be structured.

Meanwhile, on Wall Street Wednesday, stocks were up early and down late, as the drumbeat of bad economic news is offset by a smattering of reasonable earnings reports from major firms.

Dow 7,886.57, -82.99 (1.04%)
NASDAQ 1,646.12, +2.27 (0.14%)
S&P 500 843.55, -6.53 (0.77%)
NYSE Composite 5,290.61, -48.98 (0.92%)

Despite the negative slant to the markets on the day, advancers actually outperformed declining issues, 3440-3006. There were 83 reported new lows to 34 new highs. Volume was again on the high side.

NYSE Volume 1,770,590,000
NASDAQ Volume 2,662,538,000

Commodities continued to limp along, dealing with slack demand in many industries. Crude oil for June delivery (new contract) gained just 30 cents, closing at $48.85. Foodstuffs were marginally lower. Precious metals continued to show some strength, with gold higher by $9.80, to $892.50. Silver finished the day in New York up 25 cents, at $12.31.

First time unemployment claims will greet market players on Thursday morning before the open. Experts are hoping for a continuation of last week's slight surprise of lower claims, though overall, unemployment remains abnormally high an a chief concern for millions of Americans and their families. More corporate reports will flow to market, though expectations are now so low that a good number may beat the Street but still be seen as vulnerable investments.

Sooner or later, the bad news catches up to everyone. While the government and media outlets try to paint a brighter picture than that which exists, issues such as trust and confidence are being severely tested.

Bank Oligarchs, the Fiddler President and Congressional Circus Clowns

There were no major economic data releases today, though there were a number of companies reporting 1st quarter earnings, including Bank of New York Mellon Corp., Northern Trust and State Street, all of which showed declines in earnings, though the latter beat analyst estimates.

Disappointing results from banking interests - reported eithe before the open or during the session - didn't deter investors from sparking a rally in financials, however, pushing the major indices to recoup some of Monday's dramatic decline.

After the close, CapitalOne (COF), once the nation's largest stand-alone credit card issuer, reported a net loss for the first quarter of 2009 of $111.9 million, or $0.45 per common share, which was far better than last quarter - a $1.4 billion loss, or -$3.74 per share - but far worse than the same period last year, in which the company reported a profit of $548.5 million, or $1.47 per share. during the session, shares of CapitalOne were higher by 1.67 (12.50%), but were seen lower in after-hours trading, down more than a point shortly after the earnings release.

On the Dow, 25 of 30 component stocks finished with gains. Leading the way were the three bank stocks - JP Morgan Chase (JPM), Bank of America (BAC) and Citigroup (C) - all of which ended the day at least 9.5% to the good. How the very same banks which are controlling the economy are manipulating the markets is a grand shame and these oligarchies need to be dismantled, as explained below.

Caterpillar (CAT) reported its first quarterly loss since 1992 and drug maker Merck (MRK) reported a profit but missed earnings estimates.

As for the rest of the market, suffice it to say that the market is mostly comprised of day-trading Wall Streeters and hedge fund managers who follow the leaders, which is why stocks were broadly higher today, despite the absence of any positive news.

Dow 7,969.56, +127.83 (1.63%)
Nasdaq 1,643.85, +35.64 (2.22%)
S&P 500 850.08, +17.69 (2.13%)
NYSE Composite 5,339.59, +119.47 (2.29%)

Advancing issues turned the table on decliners, beating them 4846-1627, though new lows continued the spread over new highs, by a count of 69-18. Volume was solid, though unspectacular.

NYSE Volume 1,671,525,000
Nasdaq Volume 2,435,768,000

In the commodity markets, a slight bounce from Monday's drubbing, with crude futures up 63 cents, to $46.51. Gold lost $4.60, to $882.70, with silver off a nickel, to $12.06. Futures for various foodstuffs were mostly higher.

Appearing before the Joint Economic Committee of Congress today were, among others, Federal Reserve Bank of Kansas City President Thomas Hoenig, Columbia University professor Joseph Stiglitz and MIT professor Simon Johnson, each of whom expressed skepticism over whether current government actions were effective in relieving the economic distress in the banking sector.

Will the government listen, and even more to the point, do the congressional member and senators who convened these hearings, actually understand what they're saying? Probably not. Politicians are a breed of people who understand power and politics and little more. What they do know is that their allegiance is to the Wall Street bankers, because that group, by and large, financed the campaigns that put them or keeps them in positions of power.

As usual, it will be politics first, constituents (the actual ones they're supposed to represent), last, and so, the sad saga of our nation being run into the ground by a coalition of Wall Street financiers and political puppets in Washington will continue unabated. Today's hearings are just more window dressing, designed to keep the public from rising up, rioting and throwing the whole bunch into the East and Potomac Rivers, which is precisely what should happen and very well may happen if this fiasco of keeping insolvent banks operating under clouds of secrecy and mountains of non-negotiable debt is allowed to continue much longer.

Below, Yahoo's Tech Ticker talks with former IMF chief economist and current MIT economics professor Simon Johnson about the big banks and how they stand in the way of a meaningful economic recovery.



Here is Johnson's breathtaking article, The Quiet Coup in this month's Atlantic.

Near the end of his reveling writing, Johnson finally comes to speak the unspeakable:

The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances.

There you have it. A respected economist - not me, a generally disrespected populist pundit blogger - says this current condition could devolve into something worse than the Great Depression. I've held that view all along, since early in 2007, and if you check my archives at Downtown Magazine, probably as early as 2002 or 2003, when I reported on the then-emerging pension crisis which now continues beneath the surface.

Like Johnson, I hold out slim hopes that the elite in Washington and the ruling oligarchs on Wall Street will yield power without a fight of monstrous proportions, against the citizenry of the United States, and to a larger extent, the populations and governments of their trading partners globally.

Mr. Johnson and I are not alone. The chorus for concentrated government action to close down the insolvent banks and replace their inept and likely corrupt management, is growing at a very rapid pace. The longer the government dithers, the closer the nation comes to the precipice of economic, political and social destruction.

Finally, below, here's the second part of Henry Blogett's interview with Simon Johnson, in which he extolls the virtue of quick, decisive action in cleaning up and breaking up the major bank's stranglehold on the country's finances:



It's become clear to just about everyone in the world, except the pols in Washington and the banksters themselves, that breaking up the nation's biggest banks and dismantling their management and interlocking boards of directors would provide the quickest, cleanest and least costly resolution to the global financial condition. Instead, President Barack Obama, like Nero in ancient Rome, fiddles while the empire burns to the ground and the congress can only be compared to circus clowns for all the good they've done over the past six months.

The Road To Hell: Nothing's Changed Except Options

On Monday, stocks fell in dramatic fashion right from the opening bell until the close of trading, without interruption or even a hint of a rally. Odd, isn't it, that after 6 consecutive weeks of gains, stocks would take their worst beating in well over a month?

Not at all, if one considers the power of the major players on Wall Street to influence the direction of stocks to their liking. The only thing that's changed since Friday is that there are no options close to expiration, no easy profits to be made on the backs of trusting investors, so the big money did on Monday what they always do when there's no "easy" money to be had, they sold off en masse.

My own family and friends often ridicule me for my extreme views on market manipulation, but I don't complain. Over the weekend, while at a family gathering, the "geniuses" of finance were all gloating over the recent rally, claiming that the economy was all well and good, and that my "gloom and doom" was once again proven wrong. I replied that there was 100% certitude that the rally was over and stocks would end their 6-week streak beginning this week, precisely for the aforementioned reasons.

Unfortunately for me, I didn't make any bets with the naysayers on my prediction, as I'd be cashing them later this week. Stocks have become overbought to the extreme and the big money knows it's time to take money off the table before the deluge of disappointing earnings commences.

The action on the street was one-way, broad-based and heavy. No surprise there. Where it goes from here is probably going to be a little more difficult to predict on a daily basis as the markets will gyrate through earnings season. Some stocks will do well while others will crack new 52-week lows. Overall, however, the action will be to the downside, as the media hypes unemployment, commercial real estate blowup, continuing housing crisis, banks that don't lend, consumers that don't spend and an economy that refuses to mend. (amazingly, gloom and doomers can rhyme pessimistically)

For some perspective, Monday's loss n the Dow was the largest since March 2nd, and the fifth largest of 2009. There have been some very bad days on Wall Street this year, and today's decline provides an argument that they are far from over. Investors refused to capitulate after the collapse from September to November of 2008, and the subsequent fall-over from January through mid-March, so logic dictates that the final leg of this great bear market has yet to occur. There is every reason to believe that stocks will retest and even surpass the March 9 lows, just as they have crushed September and October, 2008 lows and the November, 2008 lows. Brace for impact.

Dow 7,841.73, -289.60 (3.56%)
NASDAQ 1,608.21, -64.86 (3.88%)
S&P 500 832.39, -37.21 (4.28%)
NYSE Composite 5,220.12, -260.48 (4.75%)

To illustrate the depth of today's sell-off, consider that declining issues beat back advancing ones by a large ratio - 6 to 1 - 5548-918. The most persistent indicator - new highs vs. new lows - maintained its bias throughout the recent rally toward new lows as it has for the past 18 months running and expanded the gap on Monday with 68 new lows to just 8 new highs. Expect that margin to increase dramatically over the coming weeks.

And if there was any one indicator pointing directly to the false aspects of this six-week rally it was trading volume, which was literally at the highest level of the year.

NYSE Volume 1,761,254,000
NASDAQ Volume 3,246,035,000

The rally of the past six weeks was built entirely on hype, lies and manipulation, the catalyst being those billions of dollars passed out from the government to the banks, which also double as brokerages. Want to know where the TARP money went? Take a look at that massive rally. It went into stocks and is now going to disappear, just like the money thrown into phony structured mortgage securities and credit default swaps.

Let the arguments for inflation begin and end right here. All of the stimulus and excess spending will not result in inflation and a lower dollar. The dollar has been rising against other currencies throughout the recent spending spree, and for good reason, the money created was phony, just like the prices of stocks. Nobody except the most expert of traders actually made money during this rise, and many of them are in the process of giving that back and then some. As much as the Federal Reserve would like to re-ignite the flames of inflation, they cannot do it by simply creating more money. As much as they create, Lord Keynes' "invisible hand" of the market will seek it out and destroy it with greater purpose and efficiency.

The basic structure of the economy is unbalanced. Labor, capital and resources have nowhere to go. Jobs continue to be lost, capital wasted and resources idled. Unless money, labor and resources are put to productive use - not into the stock market for paper gains - recovery and balance is impossible. Inflating the amount of money "in circulation" when it is actually being hoarded and squandered by the banks will not produce prosperity. Only a real, true accounting of the malinvestments and an orderly disposition of the liabilities produced can produce a resumption of prosperity. Anything less than that will produce only what we've already seen: false market rallies, continued deflation and ultimately - unless we change our ways - the complete breakdown of all contracts - economic, political and social.

In brief, the government, by tinkering with money supply and public relations trickery instead of doing the hard, necessary work of admitting that certain large banks are insolvent, threatens the very existence of not just the economy, but of the political process by which they were elected and the social fabric the keeps the nation a functional democracy. It's likely that the government has less than a year left to mend its ways or the United States of America runs the very real risk of devolving into chaos and anarchy, complete with threats of state secession, gangs, riots, homelessness, starvation and death.

Sounds like fun, huh?

Government's answers so far have been confined to bank bailouts (handouts), extensions of unemployment insurance (more handouts), increases in welfare payments (even more handouts) all with borrowed money. The spigot is about to run dry as foreign investors refuse to buy our new toxic investments, US Treasury bills, notes and bonds. Meanwhile, the tax burden on individuals grows.

There is no way to spend ourselves out of this mess. Fiscal discipline is a necessity which, thus far, has not even warranted a mention in the congress and various state-houses. Taxes have to be lowered dramatically, along with the requisite cuts in government spending. Those policies - exactly the reverse of what's being tried - are a major part of the solution. The rest of the formula is for investment in actual working industries, in technology, agriculture and manufacturing, not education, public works and education, which produce nothing.

Another proxy for the health of the global economy could be seen on the commodity markets. Crude oil for May delivery lost $4.45, to $45.88, a massive pull-back off recent highs. The precious metals suddenly reversed course, with gold gaining $19.60, to $887.50 and silver adding 32 cents to $12.11 (still a bargain).

There is no pricing power anywhere in anything priced in dollars. From foodstuffs to consumable energy, i-pods to pianos, prices are plummeting as consumers retrench, just as out government entities should. For a change, government should take heed of what the public is doing - hunkering down, avoiding waste, saving - and do likewise.

I've got $1000 that says they won't until it's too late to save themselves from themselves. In the immortal words of the great comic strip Pogo, "we have met the enemy and it is us."

Stocks Chalk Up 6th Straight Winning Week

While the current rally may be nothing more than a bear market variety, it sure has packed a punch, registering 6 consecutive weeks of gains since bottoming out on March 9.

For the record, here are the numbers with the close of March 9 as a baseline:

The Dow Jones Industrials is up 1584 points, from 6547 to 8131, a gain of 24.2%.

The NASDAQ is up 405 points, from 1268 to 1673 (32%).

The S&P 500 is up 193 points, from 676 to 869 (28.6%).

The NYSE Composite is up 1254 points, from 4226 to 5480 (29.7%).

The overall gains this week were not spectacular, something on the order of 2%.

There were no important economic reports, and the corporate earnings releases came from Citigroup (C), General Electric (GE) and after-hours yesterday Google (GOOG). All of the companies beat lowered expectations, but while GE and Google showed profits, their stocks registered a gain of about 1% on the day, Citigroup, which posted a narrower loss than estimated, suffered a 9% decline on the day.

One gets the distinct impression that the gains may be coming to an end as volatility was completely wrung out of the market over the past few sessions, and stocks had already been bid up prior to earnings. The expectation is that investors will take flight - and profits - at the first sign of weakness, since, by and large, earnings have beaten lowered expectations, but overall are down anywhere from 20-90% (as was the case with Nokia) from year-ago figures.

Essentially, the stock gains, when compared to actual earnings, may be a bit overdone, though there seems to be a level of risk appetite not usually seen after deep market bottoms. This is suggestive of investors not having fully capitulated, which, if that is the case, the worst is still to come. To believe that 30 years of excessive credit and spending would be cured with some government hokus pokus is pure folly. Mortgage delinquencies are still churning in at a record pace, and now the commercial market is about to roll over. Unemployment has shown no slowdown whatsoever. Real estate and unemployment will continue to be the main drivers of the downward economy and they are nowhere near bottoms.

Dow 8,131.33, +5.90 (0.07%)
NASDAQ 1,673.07, +2.63 (0.16%)
S&P 500 869.60, +4.30 (0.50%)
NYSE Composite 5,480.60, +26.33 (0.48%)

On the day, advancers dominated decliners, 4150-2345, but new lows continued ahead of new highs, 76-37. Volume was very high, owing to options expiration. However, one could assume, with all of the action options-related activity that the tight range of the past three sessions was indicative of a well-played hand by Wall Street insiders. Otherwise, there would have been more of a radical trading pattern.

NYSE Volume 1,953,123,000
NASDAQ Volume 2,416,468,000

Commodities continued along the same pattern that has persisted over the past few weeks. Oil inched higher, up 35 cents, to $50.33. Crude has bounced above and below $50/barrel but has not escaped the range. While some supposed experts in crude keep calling for $65-75/barrel near term, the massive oversupply currently on the market, juxtaposed with continuing slumping demand should produce oil in the range of $35-40. Since the oil market is tiny and prone to manipulation, it is likely that price is being kept constant by some of the larger players. Eventually, their gambit will fail; the most obvious factor being that oil usually moves in reverse ratio to the dollar. As the dollar has strengthened, oil has not declined accordingly. There is a day of reckoning coming as reality meets markets.

The same could be said of the precious metals, which have been in a protracted decline for weeks. Gold tumbled again today, losing $11.90, to $867.90. Silver was also downgraded, dropping 47 cents to $11.79.

Gold and silver are presenting incredibly good buying opportunities. As soon as the markets begin to retrace their recent gains, the metals should reverse course, though the rise may not be rapid, due to deflationary pressures.

As weeks go, this one was one of a duller variety. Next week, when many more companies will be reporting first quarter earnings, should be more exciting.